TSMC SPOKESPERSON
Name: Harvey Chang
Title: Senior Vice President &CFO
Tel: 886-3-578-0221 Fax: 886-3-578-1545
Email: spokesperson@tsmc.com.tw
Acting Spokesperson
Name: J.H. Tzeng
Title: Public Relations Department Manager
Tel: 886-3-567-3338 Fax: 886-3-567-0121
Email: jhtzeng@tsmc.com.tw
AUDITORS
Company: T N SOONG & CO
Auditors: S. C. Huang, Edward Way
Address: 12F, No. 156, Sec. 3, Min-Sheng E. Rd.
Taipei, Taiwan 105, R.O.C.
Tel: 886-2-2545-9988 Fax: 886-2-2545-9966
Website: http://www.andersen.com.tw
STOCK TITLE TRANSFER
Company: China Trust Commercial Bank
Transfer Agency Department
Address: 5F, No. 83, Sec. 1, Chung-Ching S. Rd.
Taipei, Taiwan 100, R.O.C.
Tel: 886-2-2361-3033 Fax: 886-2-2311-6723
Website: http://www.chinatrust.com.tw
ADR DEPOSITARY BANK
Company: Citibank, N.A.
Depositary Receipts Services
Address: 20F, No. 111 Wall Street, Zone 7
New York, NY10005, U.S.A.
Tel: 1-212-657-2770 Fax: 1-212-825-5398
Email: citibank@em.fcnbd.com
Website: http://www.citibank.com/adr
TSMC WEBSITE: http://www.tsmc.com
MAJOR FACILITIES
Corporate Headquarters & FAB 2, FAB 5
No. 121, Park Ave. 3
Science-Based Industrial Park
Hsin-Chu, Taiwan 300-77, R.O.C.
Tel: 886-3-578-0221 Fax: 886-3-578-1546
FAB 3
No. 9, Creation Rd. 1
Science-Based Industrial Park
Hsin-Chu, Taiwan 300-77, R.O.C.
Tel: 886-3-578-1688 Fax: 886-3-578-1548
FAB 6
No. 1, Nan-Ke North Rd.
Science-Based Industrial Park
Shan-Hwa, Tainan, Taiwan 741, R.O.C.
Tel: 886-6-505-2000 Fax: 886-6-505-2058
FAB 7
No. 6, Creation Rd. 2
Science-Based Industrial Park
Hsin-Chu, Taiwan 300-77, R.O.C.
Tel: 886-3-578-5112 Fax: 886-3-578-2038
FAB 8
No. 25, Li-Hsin Rd.
Science-Based Industrial Park
Hsin-Chu, Taiwan 300-77, R.O.C.
Tel: 886-3-567-8888 Fax: 886-3-566-2051
FAB 12
No. 6, Li-Hsin Rd. 6
Science-Based Industrial Park
Hsin-Chu, Taiwan 300-77, R.O.C.
Tel: 886-3-563-6688 Fax: 886-3-563-7000
TSMC North America
No. 2585, Junction Avenue
San Jose, CA 95134, U.S.A.
Tel: 1-408-382-8000 Fax: 1-408-382-8008
TSMC Europe B.V.
World Trade Center, Strawinskylaan 1145
1077 XX Amsterdam, The Netherlands
Tel: 31-20-305-9900 Fax: 31-20-305-9911
TSMC Japan K.K.
21F, Queen's Tower C, 2-3-5, Minato Mirai
Nishi-ku, Yokohama, Kanagawa, 220-6221, Japan
Tel: 81-45-682-0670 Fax: 81-45-682-0673
TSMC Shanghai Representative Office
Suite 4605, Plaza 66, 1266 Nanjing W. Rd.
Shanghai, China Postcode: 200040
Tel: 86-21-6288-3558 Fax: 86-21-6288-2528
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS
A BRIEF INTRODUCTION TO TSMC
1. Company Profile
2. Organization
3. Capital and Shares
4.
Issuance of Corporate Bonds
5. Preferred Shares
6.
Issuance of American Depositary Shares
7. Employee Stock Option
8. Merge and Acquisition
9. TSMC Education and Culture Foundation
OPERATIONAL HIGHLIGHTS
1. Business Activities
2. Marketing and Sales
3. Personnel Growth over the Last Two Years
4. Employee Relations
5. Environmental Protection Measures
6.
Important Contracts
7. Litigation Proceedings
8. Notes on Board and Shareholders
9. Acquisition or Disposition of Real Estate
FINANCING PLANS AND IMPLEMENTATION
1. Preferred A Shares
2. Corporate Bond
FINANCIAL INFORMATION
1. Condensed Balance Sheet
2. Condensed Statements of Income
3. Financial Analysis
4. 2001 Condensed Interim Balance Sheet by Quarterly
5. 2001 Condensed Interim Statement of Income by Quarterly
6. Auditors' Opinion
7. Supervisors' Report
8. Review and Analysis of Financial Status and Operating Results
9. Financial Statements and Independent Auditors' Report
10.Consolidated Financial Statements
11.Financial Forecast and Results from 2000 to 2001
SPECIFIC NOTES
1. Affiliates Information
2.
Internal Control System Execution Status
3. Dissenting Comment
4. Private Placement Securities
5. Balance of TSMC Common Shares/ADR Acquired,
Disposed of and Held by Subsidiaries
6. Other Necessary Supplement
7. US GAAP Financial Information
3
6
6
8
13
17
18
19
20
20
21
23
23
27
32
32
33
34
36
36
37
38
38
38
40
42
43
44
45
46
47
47
48
49
85
128
129
129
178
179
179
179
179
180
2
T S M C A n n u a l R e p o r t 2 0 0 1
LETTER TO THE SHAREHOLDERS
Dear Shareholders,
The global IC market was contracted by over 30 percent in 2001, making it the worst-ever downturn in the history of
the semiconductor industry. By continuously providing the most advanced manufacturing technologies and services
to support our customers, TSMC was able to weather the downturn better than most other companies in the
industry. We did experience a bottom earlier during 2001, but our monthly sales increased steadily during the second
half of the year. In the end, while others in the foundry industry suffered losses in 2001, we still outperformed the
overall semiconductor industry. We came up with a profit exceeding NT$14,483 million and also strengthened our
leadership in the foundry business by gaining significant market shares. Now we are pleased to report the following
achievements.
Technology Advancement
Through 2001, TSMC persisted in helping our customers enhance their competitiveness in their markets by providing
s t a t e - o f-the-art manufacturing technologies. While maintaining our leadership in the mainstream 0.18um and
0.15um process technologies and volume production capability, we also started to provide customers with
manufacturing services of the advanced 0.13um process technology.
In addition, in the next generation 90nm technology development,
we have not only completed the basic module design in 2001, but
also formed strategic alliances with IDM customers as well as library,
IP, and design service companies to increase future compatibility.
Capital Expense and Capacity
Responding to the downturn and the decline of orders in 2001, TSMC
slowed the pace of its capital investment. As a result, capital expense
for 2001 totaled US$2.2 billion, a decrease of 40 percent from
previous capital expense in 2000. The bulk of our investments were
dedicated to increasing the capacity of our 0.18um, 0.15um and
0.13um processes. The company's utilization rate also remained well
ahead of our competitors. As a result, TSMC is emerging from the
downturn to a stronger market position than the position it held at
the close of 2000.
Fab 12 is the center of future technology development at TSMC. The
Company reached volume production on a 0.13um all-layer copper
process in a full-scale 12-inch production plant (Fab 12) in 2001,
making us the first dedicated foundry to achieve this goal. In
addition, TSMC also completed a comprehensive study on the impact
of high-speed railway vibrations in the vicinity of the Tainan Science-
Based Industrial Park. The study confirmed that given proper plant
engineering resources, such vibrations would not pose a threat to the
quality of output at our production facilities in Tainan. As a result, the
construction of our second 12-inch facility (Fab 14) that had been
temporarily suspended due to concerns over the vibration issue was
subsequently resumed.
Morris Chang, Chairman and CEO
T S M C A n n u a l R e p o r t 2 0 0 1
3
Sales and Marketing
Maintaining a strong partnership with existing customers, expanding the scope of our foundry services and attracting
new customers have consistently been TSMC's primary goals. During 2001, dozens of first-time customers decided to
form partnership with us, bringing our total customer base up to around 400.
Our customers participate in a significant and wide range of the integrated circuit market; market segments include
computers, communication and consumer electronics. The broad cross-distribution of our customer base and the
market segments have also helped us better adapt the ups and downs of global economy.
On a geographic basis, sales from North America accounted for 68 percent of TSMC's 2001 revenue. Sales from the
Asia Pacific region (excluding Japan) accounted for 16 percent of revenue, while Japan and Europe accounted for 10
percent and 6 percent of revenue respectively.
In 2001, TSMC also set up an office in Shanghai to commence our company's entry in the emerging semiconductor
market in China. This initiative should put TSMC to a competitive position in the fast growing market in Mainland
China.
Revenues and Net Profits
2001 was a difficult year for the semiconductor industry globally. Nevertheless, with our strong core competence in
technology and our commitment to service innovation, TSMC outperformed the IC industry and ended the year with
revenues totaled NT$125,888 million and net profits totaled NT$14,483 million. Earnings per share for 2001 were
NT$0.83.
Recognition and Awards
In 2001, our performance in business management and our commitment to technology, quality and services
continued to receive recognition both at home and abroad. In its annual corporate survey for 2001, the Common
Wealth Magazine ranked TSMC as Taiwan's number one company for the fifth consecutive year. TSMC was also
ranked first in the corporate surveys conducted by Far Eastern Economic Review, CFO Asia and Asiamoney.
From left to right -
Rick Tsai, President and COO
Morris Chang, Chairman and CEO
F.C. Tseng, Deputy CEO
4
T S M C A n n u a l R e p o r t 2 0 0 1
Future Outlook
2002 Production Plan*
The global semiconductor industry remains cyclical. However, we are
Quantity: thousand pcs 8" wafer
confident in maintaining a healthy growth in 2002. The dedicated
foundry industry, which was created by our company, will keep playing
an increasingly important role and at the same time growing at a rate
that is expected to surpass that of the overall IC industry. In the future,
we will also strive to maintain our leadership in advanced technology
development and customer partnerships. Greater efforts will be
devoted to establish a new semiconductor "Virtually Integrated Value
Chain" that combines our silicon foundry expertise with the expertise
875
526
507
552
398
294
171
of our customers, equipment suppliers, design services partners, and
Fab 2 Fab 3 Fab 5 Fab 6 Fab 7 Fab 8 Fab 12
packaging and testing service providers. It is our goal to further
strengthen the bonds of partnership with these entities and to achieve
* TSMC only: 3,324 thousand pcs 8" wafers;
total TSMC managed capacity: 3,987 thousand pcs,
including WaferTech, VIS, and SSMC
a win-win situation for all of us.
Acknowledgement
Once again, we would like to thank all of our customers, suppliers,
shareholders and employees for their continued support and
dedication. These are the people who have made it possible for TSMC
to steady its steps and continue its march towards success in solid
strides. We would like to take this opportunity to offer our deepest
appreciation to all of you out there.
2002 Sales Plan by Technology
Quantity: thousand pcs 8" wafer
Morris Chang,
Chairman and CEO
F. C. Tseng,
Deputy CEO
Rick Tsai,
President and COO
>=0.50 um 14%
0.35 um 13%
0.25 um 28%
0.18 um 21%
0.15 um 18%
<=0.13 um 6%
T S M C A n n u a l R e p o r t 2 0 0 1
5
A BRIEF INTRODUCTION TO TSMC
1. Company Profile
Founded on February 21, 1987, Taiwan Semiconductor Manufacturing Company (TSMC) is the world's largest
dedicated integrated circuit (IC) foundry. Based in the Hsin-Chu Science-Based Industrial Park, known as Ta i w a n ' s
Silicon Valley, TSMC is listed on both the Taiwan Stock Exchange (TSE) and the New York Stock Exchange (NYSE) under
the symbol TSM.
TSMC is the first dedicated IC foundry in the world, and remains the industry leader. The goal of the Company was
straightforward from its very inception, namely, to provide advanced IC manufacturing services to its customers.
TSMC's charter prevents it from designing, manufacturing or marketing IC products under its own brand name,
making it a true partner with and not a competitor to its customers. TSMC's success in the foundry industry has
served as an inspiration for many companies, enhancing significant acceleration in technological innovation in
general. With TSMC as the driving force of change since 1987, the number of global fabless IC companies has grown
s u b s t a n t i a l l y. What was once only a concept, a "pure play" of the foundry industry, has played a vital role in
technology advancement and generated billions of dollars in revenues. As the semiconductor industry faces constant
consolidation and ever rising costs of IC fab construction, dedicated foundry companies like TSMC are expected to
become an important source of IC manufacturing worldwide.
As a leader in the foundry sector, TSMC has built its reputation by offering cutting-edge technologies, advanced
wafer production processes, and unparalleled manufacturing efficiency. From the very beginning, TSMC has
consistently produced the foundry industry's leading technologies, including 0.18um, 0.15um and 0.13um
complementary metal oxide semiconductor (CMOS) logic processes. TSMC now offers the foundry industry's most
comprehensive set of technology processes, including CMOS logic, mixed-signal/radio frequency, flash, high-density
embedded memory, BiCMOS and silicon germanium (SiGe) BiCMOS.
To further enhance its organizational efficiency, TSMC Fab 3 and 4 were consolidated in the first quarter of 2002. Fab
1, which TSMC had previously leased from Taiwan's Ministry of Economic Affairs and Industrial Technology Research
Institute since the inception of the Company will be decommissioned on March 31, 2002. However, most of the
processes in Fab 1 had been moved to other TSMC facilities to ensure continuing high-quality customer service. TSMC
operates one 6-inch wafer fab (Fab 2), five 8-inch fabs (Fab 3, 5, 6, 7 and 8), and one 12-inch fab (Fab 12). The
Company also has substantial capacity commitments to its subsidiary Wa f e r Tech in the United States; its affiliate
Vanguard International Semiconductor Corporation (VIS) in Hsin-Chu; and its joint venture partner Philips
S e m i c o n d u c t o r, known as Systems on Silicon Manufacturing Company (SSMC) in Singapore. TSMC is currently
constructing another 12-inch manufacturing facility, Fab 14, in Tainan, which is expected to begin production in
2003. Total installed annual capacity in 2002 is approximately 4 million 8-inch equivalent wafers.
Another one of TSMC's major objectives is to be its customers' "Virtual Fab". That is, to provide its customers with the
benefits of an in-house fabrication plant without the associated expense or organizational complexity. Its intent is to
make foundry services as transparent to customers as possible. To that end, TSMC launched the industry's first "e-foundry"
service in 2000 that continued in 2001 to extend much of its structure of customer service onto the Internet to
provide customers with a real-time and "personalized" view into our manufacturing operations.
6
T S M C A n n u a l R e p o r t 2 0 0 1
T S M C A n n u a l R e p o r t 2 0 0 1
7
As a responsible corporate citizen, TSMC takes both community service and employee relations seriously. For example,
TSMC's award-winning Culture and Education Foundation supports activities in Taiwan that promote education
programs, social services, art and cultural activities both in the Company's immediate communities and in the
c o u n t r y. The Foundation also strives to upgrade quality of life for Taiwan's society through long-term community
development efforts.
TSMC's operating committee is comprised of many outstanding individuals, all of whom are committed to the success
of the foundry industry in general and TSMC in particular. TSMC's Chairman and CEO Dr. Morris Chang has been at
the forefront to lead this unique task force and has received both national as well as international recognition for his
achievements. In 2001, both Time Magazine and CNN named Dr. Chang one of the 25 most influential global
executives. In addition, the Common Wealth Magazine also ranked Dr. Chang number one among "The Most Admired
Entrepreneurs in Taiwan" for the fourth consecutive year. In 2000, Dr. Chang received the first-ever Robert N. Noyce
Medal from the Institute of Electrical and Electronics Engineers (IEEE) for his vision and leadership in pioneering the
silicon integrated circuit foundry industry.
2. Organization
2-1 Organization Chart & Function Description
Supervisors
Shareholders'
Meeting
Board of
Directors
Chairman
& CEO
Deputy
CEO
President
& COO
Research &
Development
Chief
Information
Officer
Chief
Technology
Officer
Worldwide
Marketing
& Sales
Human
Resources
Quality
& Reliability
Material
Management
& Risk
Management
Operations I
Operations II
Chief
Financial
Officer &
Spokesperson
General
Counsel
Marketing
Business
Operation
TSMC
North
America
TSMC
Europe
TSMC
Japan
Asia
Business
Internal
Audit
8
T S M C A n n u a l R e p o r t 2 0 0 1
● Research & Development:
Advanced technology research & development, mask operation, and design services
● Chief Information Officer:
Company-wide information infrastructure and e-Business strategy
● Chief Technology Officer:
Exploratory technology development and intellectual property strategy
● Worldwide Marketing & Sales, include:
Marketing - Strategy, technology and services marketing
Business Operation - Business plan, customer service, and supply chain management
Regional Operations- Business development & account services for North America, Europe, Japan and Asian
regions
● Human Resources:
Human resources management and organization development
● Quality & Reliability:
Quality and reliability management
● Material Management & Risk Management:
Purchasing, warehousing, industrial safety, import & export, logistic support, and environmental protection
● Operations I:
Manufacturing operations, product engineering, and back-end operation
● Operations II:
New fab planning, manufacturing technology integration, production control, industrial engineering, and
operation efficiency
● Internal Audit:
Internal audit & process compliance
● Chief Financial Officer :
Finance and accounting operation, including investor relations, treasurer, tax, assets management, financial and
management accounting
● Spokesperson:
Corporate representative to the public and press
● General Counsel:
Corporate legal affairs, contracts, patent affairs, and intellectual property management
2-2 Directors & Supervisors
Title /
Name
Date
Elected
Term
Shareholding
(Year) When Elected
Current Shareholding Spouse & Minor
Shareholding
(Note 1)
(Note 1)
Education & Experience
Shares
%
Shares
%
Shares
%
Chairman
Morris Chang
04/14/2000
3
45,109,604
0.59
81,160,464
0.45 82,432
0.00 Ph.D., Electrical Engineering,
Standford University
Chairman, TSMC
Remark
Current Managers are spouse or
Position within 2 degrees of
with Other
Company
consanguinity
to each other
Title Name Relation
Note 2
-
-
-
Director 04/14/2000
A.P.M.
van der Poel
3
1,295,885,897 16.89
2,322,227,527
12.81
-
- B.S., Electronic Engineering,
Note 2
-
-
-
Eindhoven Technical University
Chairman & CEO,
Philips Semiconductors International B.V.
04/14/2000
3
1,295,885,897 16.89
2,322,227,527
12.81
-
- B.A., Business Ecnonmics,
-
-
-
-
Erasmus University
Chief Financial Officer,
Philips Semiconductors International B.V.
Director
J.C. Lobbezoo
(Forward)
Koninklijke Philips
Electronics N.V.
Representative of Legal Entity
Koninklijke Philips
Electronics N.V.
Representative of Legal Entity
T S M C A n n u a l R e p o r t 2 0 0 1
9
Director
P.J. Zeven
Director
Chintay Shih
Director
Stan Shih
Director
F.C. Tseng
Supervisor
Robbert Brakel
Supervisor
George C. Shiu
Supervisor
S.J. Paul Chien
04/14/2000
3 1,295,885,897
16.89 2,322,227,527
12.81
-
- Nijerode School of Business
Note 2
-
-
-
President & CEO of Philips Taiwan /
Chairman of Assembleon Taiwan
04/14/2000
3
1,158,545,600
15.10 1,630,474,915
8.99
-
- Ph.D., Electrical Engineering,
Note 2
-
-
-
04/14/2000
3
984,000
0.01
3,023,328
0.02
-
Princeton University
President, Industrial Technology
Research Institute
- M.S., Electronical Engineering,
National Chiao Tung University
Chairman & CEO, The Acer Group
04/14/2000
3
12,032,090
0.16
26,556,877
0.15 89,290
0.00 Ph.D., Electrical Engineering,
Note 2
-
-
-
National Cheng-Kung University
Deputy CEO, TSMC
04/14/2000
3
1,295,885,897
16.89 2,322,227,527
12.81
-
- Post Doctorate Controllers Programme (RC),
-
-
-
-
Koninklijke Philips
Electronics N.V.
Representative of Legal Entity
Development Fund,
Executive Yuan
Representative of Legal Entity
Note 2
-
-
-
Chi Cherng Investment Co., Ltd.
Representative of Legal Entity
04/14/2000
3 1,158,545,600
15.10 1,630,474,915
8.99
-
04/14/2000
3
641,500
0.01
1,407,168
0.01
-
Free University of Amsterdam
V.P. & Financial Controller ASIA Pacific of
Philips Semiconductors
- Ph.D. Candidate in Economics,
John Hopkins University
Deputy Executive Secretary,
Development Fund, Executive Yuan
- M.S. and Engineer Degree
in Chemical Engineering,
Massachusetts Institute of Technology
President, Vanguard International
Semiconductor Corp.
Note 2
-
-
-
Koninklijke Philips
Electronics N.V.
Representative of Legal Entity
Development Fund,
Executive Yuan
Representative of Legal Entity
Note 2
-
-
-
Hsin Ruey Investment Co., Ltd.
Representative of Legal Entity
Note 1: Per the actual reported number of shares on 02/28/2002
Note 2: Current Position with Other Company
Morris Chang
Chairman of: Vanguard International Semiconductor Corp.
A.P.M. van der Poel
Director of: Koninklijke Philips Electronics N.V.
Director of:
TSMC Europe B. V.
TSMC Japan K. K.
TSMC International Investment Ltd.
TSMC Development Inc.
TSMC Technology Inc.
WaferTech, LLC
Goldman Sachs Group, Inc.
P.J. Zeven
Chairman of: Philips Electronic Building Elements Industries (Taiwan) Ltd.
Assembleon Taiwan Ltd.
Philips Electronics Industries (Taiwan) Ltd.
Philips (Taiwan) Ltd.
Philips Lighting (Taiwan) Ltd.
EBT Technology Incorporation
Chintay Shih
Director of: Vanguard Intermational Semiconductor Corp.
Stan Shih
Chairman of: Acer Incorporated
Benq Corporation
F.C. Tseng
Director of: TSMC North America
TSMC Japan K. K.
TSMC Partners, Ltd.
Kung Cherng Investment Co., Ltd.
Chi Cherng Investment Co., Ltd.
Vanguard International Semiconductor Corp.
George Shiu
Director of: Powerchip Semiconductor Corp.
S.J. Paul Chien
Director of: Powerchip Semiconductor Corp.
Vanguard International Semiconductor Corp.
2-3 Information regarding the Legal Entity Shareholders as Directors and Supervisors of the Company
As of 02/28/2002
Name of Legal EntityShareholders
Shareholders who owned more than ten percent outstanding shares or
the top ten Shareholders of Legal Entity
Koninklijke Philips Electronics N.V.
Shareholders who owned more than ten percent outstanding shares: None
Top ten shareholders: Unavailable in accordance with the regulations of the Netherlands
Development Fund, Executive Yuan
Development Fund
Chi Cherng Investment Co., Ltd.
TSMC, Kung Cherng, Chi Hsin, Po Cherng, Hsin Ruey and Cherng Huei Investment Co., Ltd.
Hsin Ruey Investment Co., Ltd.
TSMC, Kung Cherng, Chi Hsin, Po Cherng, Chi Cherng and Cherng Huei Investment Co., Ltd.
10
T S M C A n n u a l R e p o r t 2 0 0 1
2-4 Information of Directors & Supervisors
Not an
employee of
the Company;
nor a director,
supervisor or
employee of
the affiliated
companies of
the Company
With
experience
for more than
five years in
business,
finance, legal
or areas
required by
the business
of the
Company
Not a spouse
to nor having
relationship
within two
degrees of
lineal
consanguinity
with any
person
specified in
columns 2 and
3
Not a
shareholder of
natural person
directly or
indirectly
owning more
than 1% of the
Company's
outstanding
shares nor one
of the
Company's top
10 shareholders
of natural
person
Not a director,
supervisor or
employee of a
shareholder of
legal entity of the
company directly
or indirectly
owning more than
5% of the
Company's
outstanding shares
nor one of the
Company's top 5
shareholders of
legal entity
Not a director,
supervisor,
manager or
shareholder
holding more
than 5% of the
outstanding
shares of certain
companies or
institutions which
have financial or
business
relationship with
the Company
Not an owner, partner,
director, supervisor,
manager of any sole
proprietor,
partnership, company
or institution and
his/her spouse, or the
specialist and his/her
spouse, which
provided finance,
commerce, legal
consultation and
services to the
Company or its
affiliated companies
within one year
Chairman
Morris Chang
Director
A.P.M. van der Poel
Director
J.C. Lobbezoo
Director
P. J. Zeven
Director
Chintay Shih
Director
Stan Shih
Director
F. C. Tseng
Supervisor
Robbert Brakel
Supervisor
George C. Shiu
Supervisor
S.J. Paul Chien
V
V
V
V
V
V
V
V
V
V
V
"V" indicates meeting conditions specified above
2-5 Executive Officers
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
Title
Name
Date
Effective
Shareholding
(Note 1)
%
Spouse & Minor
Education & Experience
Shareholding
%
(Note 1)
Chairman & CEO Morris Chang
03/03/1998
81,160,464
0.45
82,432
0.00
Deputy CEO
F.C. Tseng
08/07/2001
26,556,877
0.15
89,290
0.00
Ph.D., Electrical Engineering, Standford University
Chairman, TSMC
Ph.D., Electrical Engineering, National Cheng-Kung University
President, TSMC
President, Vanguard International Semiconductor Corp.
President & COO Rick Tsai
08/07/2001
17,309,467
0.10
-
- Ph.D., Materials Science, Cornell University
Quincy Lin
05/13/1997
17,499,626
0.10
1,824,186
0.01
Executive V.P., Worldwide Marketing and Sales, TSMC
President, Vanguard International Semiconductor Corp.
Ph.D., Business Administration, University of Kentucky
V.P., Corporate Sales and Marketing, TSMC
Harvey Chang
02/03/1998
5,190,622
0.03
-
- MBA, Wharton School, University of Pennsylvania
Chairman, China Securities Investment Trust Corp.
President, China Development Corp.
Senior Vice
President & CIO
Senior Vice
President & CFO
(Forward)
Current
Position
with Other
Company
Managers are spouse
or within 2 degrees of
consanguinity to each other
Title
Name
Relation
Note 2
Note 2
Note 2
Note 2
Note 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
T S M C A n n u a l R e p o r t 2 0 0 1
11
Senior Vice
President
Senior Vice
President
S.Y. Chiang
11/07/2000
7,220,170
0.04
-
- Ph.D., Electrical Engineering, Standford University
V.P., Research and Development, TSMC
Manager, Hewlett Packard
Kenneth Kin
08/07/2001
1,150,000
0.01
-
- Ph.D., Nuclear Engineering and Applied Physics,
Vice President
Y.C. Huang
08/15/1995
11,950,389
0.07
-
Vice President
J. B. Chen
09/05/2000
4,635,849
0.03
37,826
Columbia University
V.P., IBM Corporation
- MBA, Saginaw Valley State University
V.P., Corporate Services, TSMC
0.00 Master, Physics, National Tsing Hua University
V.P., Tainan Sites Operation, TSMC.
President, TSMC-Acer Semiconductor Manufacturing Corp.
Vice President
Ping Yang
08/07/2001
4,764,313
0.03
114,627
0.00
Vice President
C.C. Wei
03/03/1998
3,970,931
0.02
880
0.00
Ph.D., Electrical Engineering, University of Lllinois,
Champaign-Urbana
V.P., U.S. Subsidiary, TSMC North America
Ph.D., Electrical Engineering, Yale University
V.P., South sites operation, TSMC
Senior V.P., Chartered Semiconductor Manufacturing Ltd.
Vice President
S.H. Lee
08/11/1998
3,478,946
0.02
Vice President
Mark Liu
05/11/1999
7,223,793
0.04
Vice President
John T. Yue
11/09/1999
2,813,611
0.02
Vice President
Genda Hu
08/11/2000
502,111
0.00
Vice President
Chung-Shih Hsu
03/06/2001
491,940
0.00
CTO
Chenming Hu
08/07/2001
670,000
0.00
-
-
-
-
-
-
- Master, Management, Standford University
Regional V.P., Lucent Technologies, Asia Pacific Ltd.
- Ph.D., Electrical Engineering and Computer Science,
University of California, Berkeley
V.P., Fab. 12 Sites Operation, TSMC
President, Worldwide Semiconductor Manufacturing Corp.
- Ph.D., Physics, Standford University
Director, Advanced Micro Devices Inc.
- Ph.D., Electrical Engineering, Princeton University
V.P., Advanced Technology Development, TSMC
General Diector, Electonic Research and Service Organization
- Ph.D., Physics, Columbia University
V.P., Vanguard International Semiconductor Corp.
- Ph.D., Electrical Engineering and Computer Science,
University of California, Berkeley
Founder and Chairman, Celestry Design Technologies, Inc.
Vice President
M.C. Tzeng
08/07/2001
2,902,271
0.02
367,046
0.00 Master, Applied Chemistry, Chung Yaun University
Senior Director, Fab 2 Operation, TSMC
-
-
Note 2
-
-
-
-
-
-
-
Note 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 2
CTO
Chenming Brother
-
-
-
Hu
-
-
-
V.P.
Genda Hu
Brother
-
-
-
-
-
-
Vice President
Richard Thurston 02/08/2002
-
-
-
- J.D., Rutgers School of Law, State University of New Jersey
Note 2
Partner, Kelt Capital Ventures, LP.
Note 1: As of 02/28/2002
Note 2: Current Position with Other Company
Morris Chang
Chairman of: Vanguard International Semiconductor Corp.
Director of:
TSMC Europe B. V.
TSMC Japan K. K.
TSMC International Investment Ltd.
TSMC Development Inc.
TSMC Technology Inc.
WaferTech, LLC
Goldman Sachs Group, Inc.
F.C. Tseng
Director of:
Rick Tsai
Director of:
TSMC North America
TSMC Japan K. K.
TSMC Partners, Ltd.
Kung Cherng Investment Co., Ltd.
Chi Cherng Investment Co., Ltd.
Vanguard International Semiconductor Corp.
TSMC North America
TSMC Europe B. V.
TSMC Japan K. K.
TSMC Partners, Ltd.
Cherng Huei Investment Co., Ltd.
Hsin Ruey Investment Co., Ltd.
WaferTech, LLC
Vanguard International Semiconductor Corp.
12
T S M C A n n u a l R e p o r t 2 0 0 1
Quincy Lin
Director of:
TSMC Europe B. V.
TSMC Partners, Ltd.
Po Cherng Investment Co., Ltd.
Shin-Easu Handotai Taiwan
W. K. Technology Fund IV
Harvey Chang
Director of:
TSMC Partners, Ltd.
Chi Hsin Investment Co., Ltd.
Systems on Silicon Manufacturing Company Pte. Ltd.
Fubon Financial Holding Co., Ltd.
Supervisor of: TSMC Japan K. K.
Vanguard International Semiconductor Corp.
Y.C. Huang
Director of:
United Industrial Gases Co., Ltd.
C.C. Wei
Director of:
Systems on Silicon Manufacturing Company Pte. Ltd.
Genda Hu
Director of:
Hontung Venture Capital Co., Ltd.
Richard Thurston
Director of:
TSMC Partners, Ltd.
IT Pizza, Inc.
IP Net Fusion, Inc.
JAVA and Cha, Ltd.
QED Soft, Inc.
3. Capital and Shares
3-1 History of Capitalization
Month /
Price
Par
Authorized
Authorized
Year
Value
Shares
Amount
Issued
Shares
Issued
Amount
02/1987
10
1,000
5,510,000
5,510,000,000
1,377,500
1,377,500,000
Cash Founding
12/1988
10
1,000
5,510,000
5,510,000,000
2,204,000
2,204,000,000
Cash offering
11/1989
10
1,000
5,510,000
5,510,000,000
3,306,000
3,306,000,000
Cash offering
07/1990
- 1,000
5,510,000
5,510,000,000
3,360,797
3,360,797,000
Capitalization of Profits
Sources of Capital
Non-Monetary Date of Approval & Approval Document No.
Unit: Share / NT$
Capital
Expansion
None
None
None
-
02/21/1987 (76) Ko Chu She Tzu No. 065
12/19/1988 (77) Yuan Ching Tzu No. 15501
11/24/1989 (78) Yuan Ching Tzu No. 12823
07/23/1990 (79) Yuan Ching Tzu No. 08171
12/1990
10
1,000
5,510,000
5,510,000,000
3,911,797
3,911,797,000
Cash offering
None
12/21/1990 (79) Yuan Ching Tzu No. 14632
10
10
10
10
10
07/1991
12/1991
12/1992
08/1993
07/1994
06/1995
05/1996
07/1997
07/1998
07/1999
11/1999
06/2000
-
10
10
-
-
-
-
-
-
-
-
-
551,000,000
5,510,000,000
391,179,700
3,911,797,000
Par value change from NT$1000 to NT$10
07/18/1991 (80) Yuan Ching Tzu No. 08651
551,000,000
5,510,000,000
473,829,700
4,738,297,000
Cash offering
None
12/06/1991 (80) Yuan Ching Tzu No. 14252
551,000,000
5,510,000,000
551,000,000
5,510,000,000
Cash offering:NT$ 582,171,120
Capitalization of Profits:NT$189,531,880
780,000,000
7,800,000,000
608,304,000
6,083,040,000
Capitalization of Profits
780,000,000
7,800,000,000
780,000,000
7,800,000,000
Capitalization of Profits
10
3,000,000,000
30,000,000,000
1,439,000,000
14,390,000,000
Capitalization of Profits
10
3,000,000,000
30,000,000,000
2,654,200,000
26,542,000,000
Capitalization of Profits
10
8,500,000,000
85,000,000,000
4,081,300,000
40,813,000,000
Capitalization of Profits
10
8,500,000,000
85,000,000,000
6,047,175,967
60,471,759,670
Capitalization of Profits
10
9,100,000,000
91,000,000,000
7,548,483,035
75,484,830,350
Capitalization of Profits
10
9,100,000,000
91,000,000,000
7,670,881,717
76,708,817,170
Conversion of ECB
10 17,800,000,000 178,000,000,000
9,990,849,423
99,908,494,230
Capitalization of Profits: NT$21,320,311,040
Capital Surplus: NT$ 1,879,366,020
-
-
-
-
-
-
-
-
-
-
12/30/1992 (81) Yuan Ching Tzu No. 17304
08/27/1993 (82) Yuan Ching Tzu No. 11830
07/21/1994 (83) Yuan Ching Tzu No. 09791
06/30/1995 (84) Yuan Shang Tzu No. 09473
05/29/1996 (85) Yuan Shang Tzu No. 08703
07/11/1997 (86) Yuan Shang Tzu No. 13347
07/13/1998 (87) Yuan Shang Tzu No. 016805
07/09/1999 (88) Yuan Shang Tzu No. 014308
11/24/1999 (88) Yuan Shang Tzu No. 025112
06/05/2000 (89) Yuan Shang Tzu No. 011645
06/2000
220
10 17,800,000,000 178,000,000,000 10,105,849,423 101,058,494,230
Cash offering for ADR
None
06/30/2000 (89) Yuan Shang Tzu No. 013893
08/2000
12/2000
07/2001
-
10
-
10 17,800,000,000 178,000,000,000 11,689,364,587 116,893,645,870
Merger from WSMC & TSMC-ACER
10 17,800,000,000 178,000,000,000 12,989,364,587 129,893,645,870
Cash offering for Preferred A Share
10 24,600,000,000 246,000,000,000 18,132,553,051 181,325,530,510
Capitalization of Profits
-
None
-
08/11/2000 (89) Yuan Shang Tzu No. 018254
12/18/2000 (89) Yuan Shang Tzu No. 027775
07/19/2001 (90) Yuan Shang Tzu No. 018039
3-2 Capital & Shares
Authorized Capital
Unit: Share
Type of Stock
Issued Shares
Reserved Shares
Total
Listed
Non-Listed
Total
Un-issued Shares
for Convertible
Bond
Common Share
16,832,553,051
-
16,832,553,051
Preferred A Share
-
1,300,000,000
1,300,000,000
5,089,845,631
1,377,601,318
24,600,000,000
T S M C A n n u a l R e p o r t 2 0 0 1
13
3-3 Status of Shareholders
Stock: Common share
Government
Agency
Financial
Institution
Other Legal
Entity
Foreign Institution
& Natural Person
Domestic
Natural Person
Total
As of 03/09/2002
Number of Shareholders
8
123
894
1,579
375,918
378,522
Shareholding
1,880,345,616
778,589,766
2,073,053,964
8,754,280,980
3,346,282,725
16,832,553,051
Holding Percentage
11.17%
4.62%
12.32%
52.01%
19.88%
100.00%
Stock: Preferred A share
As of 03/09/2002
Government
Agency
Financial
Institution
Other Legal
Entity
Foreign Institution
& Natural Person
Domestic
Natural Person
Total
Number of Shareholders
Shareholding
0
0
0
0
1
1,299,925,653
0
0
59
60
74,347
1,300,000,000
Holding Percentage
0.00%
0.00%
99.99%
0.00%
0.01%
100.00%
3-4 Distribution of Common Shares and Preferred A Shares
Stock: Common share
As of 03/09/2002
Class of Shareholding (Unit: Share)
Number of Shareholders
Shareholding
Holding Percentage
1 - 999
1,000 - 5,000
5,001 - 10,000
10,001 - 15,000
15,001 - 20,000
20,001 - 30,000
30,001 - 40,000
40,001 - 50,000
50,001 - 100,000
100,001 - 200,000
200,001 - 400,000
400,001 - 600,000
600,001 - 800,000
800,001 - 1,000,000
Over 1,000,001
Total
91,795
199,218
42,351
13,876
7,930
7,237
3,773
2,415
4,568
2,406
1,288
448
264
147
806
378,522
37,284,426
450,285,580
308,668,401
171,722,602
138,887,220
177,887,129
129,977,682
108,842,797
321,672,757
337,853,330
357,000,188
220,288,745
183,620,547
130,617,572
0.22%
2.67%
1.83%
1.02%
0.83%
1.06%
0.77%
0.65%
1.91%
2.01%
2.12%
1.31%
1.09%
0.78%
13,757,944,075
16,832,553,051
81.73%
100.00%
Stock: Preferred A share
As of 03/09/2002
Class of Shareholding (Unit: Share)
Number of Shareholders
Shareholding
Holding Percentage
1 - 999
1,000 - 5,000
5,001 - 10,000
15,001 - 20,000
Over 1,000,001
Total
44
12
1
2
1
60
12,556
23,650
6,473
31,668
1,299,925,653
1,300,000,000
0.01%
99.99%
100%
14
T S M C A n n u a l R e p o r t 2 0 0 1
3-5 Net Worth, Earnings, Dividends and Market Price Per Share
Item
2000
2001
2002 (Jan.~Feb.)
Market Price Per Share
Highest Market Price
Lowest Market Price
Average Market Price
Net Worth Per Share
Before Distribution
After Distribution
Earnings Per Share
222.0
74.5
146.3
21.28
14.74
105.5
43.6
77.7
15.7
Note 1
92.5
80.0
86.9
15.94
Note 1
Weighted Average Shares (Thousand Shares)
11,400,882
16,832,554
16,832,554
Earnings Per Share
Earnings Per Share (Note 2)
Dividends Per Share
Cash Dividends
Stock Dividends
Dividends from Retained Earnings
Dividends from Capital Surplus
Accumulated Undistributed Dividend
Return on Investment
Price / Earning Ratio (Note 3)
Price / Dividend Ratio (Note 4)
Cash Dividend Yield Rate (Note 5)
5.71
3.96
0.83
0.24
-
Note 1
Note 1
2.555
0.245
-
25.62
-
-
4.000
Note 1
-
-
93.61
Note 1
Note 1
-
-
362.19
Note 1
Note 1
Note 1: Subject to change after shareholders' meeting resolution
Note 2: Retroactive adjustment for capitalizations of unappropriation earnings and bonus to employees
Note 3: Price / Earning ratio = Average market price / Earnings per share
Note 4: Price / Dividend ratio = Average market price / Cash dividends per share
Note 5: Cash dividend yield rate = Cash dividends per share / Average market price
3-6 Dividend Policy
a. TSMC shall distribute dividend, per resolution of the shareholders' meeting, according to the principles stated
below:
i. Except distribution of reserve in accordance with item (ii) below, TSMC shall not pay dividends or bonuses when
there is no profit; however, where the legal capital reserve reaches over 50% of the authorized capital or the sums
set aside as capital reserve in profitable years have exceeded 20% of such profits, TSMC may distribute the amount
in excess as dividends and bonuses. Profits may be distributed in total after taking into consideration financial,
business and operational factors. Profits of TSMC may be distributed by way of cash dividend and/or stock
dividend. Since TSMC is in a capital-intensive industry at the developmental stage of its business, distribution of
profits shall be made preferably by way of stock dividend. Distribution of profits may also be made by way of cash
dividend; provided however, the ratio for cash dividend shall not exceed 50% of total distribution.
T S M C A n n u a l R e p o r t 2 0 0 1
15
ii. In case there is no profit for distribution in a certain year, or the profit of a certain year is far less than the profit
actually distributed by TSMC in the previous year, or considering the financial, business or operational factors of
TSMC, TSMC may allocate a portion or all of its reserves for distribution in accordance with relevant laws or
regulations or the orders of the authorities in charge.
TSMC will distribute dividend in accordance with the principles above mentioned in the next three years. Since
TSMC is at the growing stage, retained earnings therefore will primarily be kept for future investment. Distribution
of earnings is expected to be mostly in the form of stock divided in the next three years.
b. The proposal for distribution of 2001 profits was adopted at the Meeting of the Board of Directors as follows:
i. Stock dividends to common shares: Totaling NT$16,832,553,060. Each shareholder of common shares will be
entitled to receive a stock dividend of 100 common shares for each 1,000 common shares held by such
s h a r e h o l d e r, subject to the record date to be determined, after being approved at the Regular Shareholders'
Meeting of the year and by the competent authority, by the Board of Directors.
ii. Cash dividends to Preferred A shares: Cash dividends of NT$455,000,000 will be distributed on a record date to
be determined, after being approved at the Regular Shareholders' Meeting of the year, by the Board of Directors.
3-7 Impact to business performance and EPS resulted from 2002 stock dividend distribution
Paid in Capital (shares at beginning of year)
Dividend Plan
Cash Dividend (per share)
Item
Stock Dividend from Retained Earnings (share/per share)
Stock Dividend from Capital Surplus (share/per share)
Business Performance
Income from Operations
% Change of Income from Operation (YOY)
Net Income
% Change of Net Income (YOY)
Earnings Per Share
% Change of EPS (YOY)
Pro Forma EPS & P/E Ratio
If Retained Earnings
Pro Forma Earnings Per Share
% Change Average Return on Investment (Reciprocal of Average P/E Ratio)
Distributed in Cash Dividend
Pro Forma Average Return on Investment (%)
If Capital Surplus not
Pro Forma Earnings Per Share
Distributed in Stock Dividend
Pro Forma Average Return on Investment (%)
If Retained Earnings
Pro Forma Earnings Per Share
Distributed in Cash Dividend &
Pro Forma Average Return on Investment (%)
Capital Surplus not Distributed in
Stock Dividend
2002
18,132,553,051
-
0.1
-
N/A
N/A
N/A
N/A
16
T S M C A n n u a l R e p o r t 2 0 0 1
4. Issuance of Corporate Bonds
4-1 Corporate Bonds
Issuance
Domestic Unsecured
Bond (I)
Domestic Unsecured
Bond (II)
Domestic Unsecured
Bond (III)
Domestic Unsecured
Bond (IV)
Domestic Unsecured
Bond (V)
Issuing Date
Denomination
03/04/1998
NT$1,000,000
11/18/1998 - 12/01/1998
10/21/1999
12/04/2000 - 12/15/2000
01/10/2002 - 01/24/2002
NT$1,000,000
NT$1,000,000
NT$ 1,000,000
NT$10,000,000
NT$1,000,000
NT$5,000,000
Issuance & Listing
ROC OTC Securities Exchange
ROC OTC Securities Exchange
ROC OTC Securities Exchange
ROC OTC Securities Exchange
ROC OTC Securities Exchange
Offering Price
Total Amount
Coupon Rate
Tenor
Guarantor
Trustee
Underwriter
Legal Counsel
Auditor
Repayment
Outstanding
Par
Par
Par
Par
Par
NT$4,000,000,000
NT$6,000,000,000
NT$10,000,000,000
NT$15,000,000,000
NT$15,000,000,000
7.71% p.a.
7.12% p.a.
Tranche A: 5.67% p.a.
Tranche B: 5.95% p.a.
Tranche A: 5.25% p.a.
Tranche B: 5.36% p.a.
Tranche A: 2.60% p.a.
Tranche B: 2.75% p.a.
Tranche C: 3.00% p.a.
5 years
Maturity: 03/04/2003
5 years
Maturity: 11/18/2003
- 12/01/2003
Tranche A: 3 years
Maturity: 10/21/2002
Tranche B: 5 years
Marturity: 10/21/2004
Tranche A: 5 years
Maturity: 12/04/2005 - 12/15/2005
Tranche B: 7 years
Marturity: 12/04/2007 - 12/14/2007 Marturity: 01/10/2009 - 01/24/2009
Tranche A: 5 years
Maturity: 01/10/2007 - 01/22/2007
Tranche B: 7 years
Tranche C: 10 years
Marturity: 01/10/2012 - 01/24/2012
N/A
N/A
The International
Commercial Bank of China
The International
Commercial Bank of China
N/A
TC Bank
N/A
The International
Commercial Bank of China
Citibank Securities (Taiwan)
Grand Cathay Securities
Grand Cathay Securities
N/A
N/A
TC Bank
N/A
Lee & Li
Lee & Li
Lee & Li
Eluvzy International Law Office
Yan-an International Law Office
TN Soong & Co
TN Soong & Co
TN Soong & Co
TN Soong & Co
TN Soong & Co
Bullet
NT$4,000,000,000
Bullet
-
Bullet
Bullet
Bullet
NT$10,000,000,000
NT$15,000,000,000
NT$15,000,000,000
N/A
N/A
N/A
N/A
Redemption or
Early Repayment Clause
Covenants
Credit Rating
Other
Rights of
Bondholders
Amounts
Converted into
or Exchanged
for Common
Shares, ADRs or
Other Securities
as of
02/28/2002
Conversion Right
N/A
Dilution Effect and Other
Adverse Effects on
Existing Shareholders
Custodian
N/A
N/A
TSMC exercised the right to
call back this bond two years
after the respective
issuance date
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
TSMC's Domestic Unsecured
Bond III has received a rating of
"twAA" from Taiwan Ratings
Corporation on 09/20/1999
TSMC's Domestic Unsecured
Bond IV has received a rating of
"twAA" from Taiwan Ratings
Corporation on 11/08/2000
TSMC's Domestic Unsecured
Bond V has received a rating of
"twAA" from Taiwan Ratings
Corporation on 12/03/2001
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
T S M C A n n u a l R e p o r t 2 0 0 1
17
4-2 Convertible Bond: Not Applicable
4-3 Exchangeable Bond: Not Applicable
4-4 Bond with Warrants: Not Applicable
5. Preferred Share
5-1 Preferred A Share
Par Value
Issuing Price
Number of Shares Issued
Total Issued Amount
Item
Issuing Date: 11/29/2000
NT$10
NT$10
1,300,000,000
NT$13,000,000,000
Right and Obligation
Dividend
Cash Dividend of 3.5% p.a.
Distribution while Liquidation
Up to Total Issue Amount (NT$13,000,000,000)
Voting Right
Others
Same as Common Share Shareholders
Fixed Rate for Cash Dividend Only, and Not Entitled for Stock Dividend.
Outstanding Shares
Redeemed/Converted
-
Balance
NT$13,000,000,000
Condition for Redemption/Conversion
Redemption at Maturity (Note)
Market Price
High
Low
Average
Miscellaneous
Conversion Amount up to Printing Date
of the Annual Report/Cash Subscription
N/A (Un-Listed)
None
Issuing/Conversion
No Conversion into Common Share
Impact/Dilution on Existing Shareholders and Preferred A Share Shareholders
None
Note: Tenor=2.5 years
5-2 Preferred Share with Warrant: Not Applicable
18
T S M C A n n u a l R e p o r t 2 0 0 1
6. Issuance of American Depositary Shares (ADSs)
Issuing Date
10/08/1997
11/20/1998
01/12/1999 - 01/14/1999
07/15/ 1999
08/23/1999 - 09/09/1999
02/22/2000 - 03/08/2000
Issuance & Listing
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
Total Amount (US$)
594,720,000
184,554,440
35,500,000
296,499,641
158,897,088.5
379,134,598.8
Offering Price per ADS (US$) 24.78
15.26
Units Issued
24,000,000
12,094,000
17.75
2,000,000
24.516
12,094,000
28.964
5,486,000
57.79
6,560,000
Underlying Securities
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
(Pursuant to ADR Conversion
Sale Program)
TSMC Common Shares
from Selling Shareholders
(Pursuant to ADR Conversion
Sale Program)
Common Shares
Represented
120,000,000
60,470,000
10,000,000
60,470,000
27,430,000
32,800,000
Rights and Obligations
of ADS Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Trustee
N/A
N/A
N/A
N/A
N/A
N/A
Depositary Bank
Custodian Bank
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
ADSs Outstanding (Note )
24,000,000
46,222,650
48,222,650
71,407,859
76,893,859
83,453,859
Apportionment of the
expenses for the issuance
and the maintenance
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
Please See the Deposit
Agreement and the Custody
Agreement for Details
Terms and Conditions in
the Deposit Agreement
and the Custody Agreement Agreement for Details
Please See the Deposit
Agreement and the Custody
Closing Price per ADS
2001
01/01/2002 - 02/28/2002
(Forward)
Please See the Deposit
Agreement and the Custody Agreement and the Custody
Agreement for Details
Please See the Deposit
Agreement for Details
Please See the Deposit
Agreement and the Custody Agreement and the Custody
Agreement for Details
Please See the Deposit
Agreement for Details
High
Low
Average
High
Low
Average
US$ 25.25
US$ 8.85
US$ 17.36
US$ 19.50
US$ 16.01
US$ 17.62
T S M C A n n u a l R e p o r t 2 0 0 1
19
Issuing Date
04/17/2000
06/07/2000 - 06/15/2000
05/14/2001 - 06/11/2001
06/12/2001
11/27/2001
02/07/2002
Issuance & Listing
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
Total Amount (US$)
224,640,000
1,167,873,850
240,999,660
297,649,640
320,600,000
1,001,650,000
Offering Price per ADS (US$) 56.16
35.75
20.63
20.63
16.03
16.75
Units Issued
4,000,000
32,667,800
11,682,000
14,428,000
20,000,000
59,800,000
Underlying Securities
TSMC Common Shares
from Selling Shareholders
Cash Offering
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
(Pursuant to ADR Conversion
Sale Program)
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
TSMC Common Shares
from Selling Shareholders
Common Shares
Represented
20,000,000
163,339,000
58,410,000
72,140,000
100,000,000
299,000,000
Rights and Obligations
of ADS Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Same as those of
Common Share Holders
Trustee
N/A
N/A
N/A
N/A
N/A
N/A
Depositary Bank
Custodian Bank
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
Citibank, N.A. -
New York
Citibank, N.A. -
Taipei Branch
ADSs Outstanding (Note)
87,453,859
144,608,739
156,290,739
170,718,739
259,006,235
318,806,235
Apportionment of the
expenses for the issuance
and the maintenance
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by
TSMC and the selling
shareholders, while the
maintenance expenses
such as annual listing fees
and accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
Terms and Conditions in
The Deposit Agreement
and the Custody Agreement Agreement for Details
Please See the Deposit
Agreement and the Custody Agreement and the Custody Agreement and the Custody
Please See the Deposit
Please See the Deposit
Agreement for Details
Agreement for Details
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
Please See the Deposit
Agreement and the Custody
Agreement for Details
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
All fees and expenses
such as underwriting
fees, legal fees, listing
fees and other expenses
related to the issuance of
ADSs were borne by the
selling shareholders,
while the maintenance
expenses such as annual
listing fees and
accountant fees were
borne by TSMC
Please See the Deposit
Agreement and the Custody Agreement and the Custody
Agreement for Details
Please See the Deposit
Agreement for Details
Closing Price per ADS
2001
High
Low
Average
01/01/2002~02/28/2002
High
Low
Average
US$ 25.25
US$ 8.85
US$ 17.36
US$ 19.50
US$ 16.01
US$ 17.62
Note : TSMC has in aggregate issued 204,811,800 ADSs since 1997, which, if taking into consideration of stock dividend distributed over the periods, would amount to 319,269,235 ADSs.
As of 02/28/2002, total number of outstanding ADSs was 318,806,235 after 463,000 ADSs were redeemed.
Stock dividend distributed in 1998, 1999, 2000 and 2001 was 45%, 23%, 28% and 40% respectively.
7. Employee Stock Option: Not Applicable
8. Merge and Acquisition in 2001: Not Applicable
20
T S M C A n n u a l R e p o r t 2 0 0 1
9. Corporate Citizen: the TSMC Education and Culture Foundation
TSMC takes pride in its role as an exemplary corporate citizen and its commitment to Taiwan's social and cultural
development. In an attempt to identify and meet the ever-rising diversity of societal needs through a formal vehicle,
TSMC established the TSMC Education and Culture Foundation (TSMC Foundation) in 1998. The Foundation's mission
is guided by the following three principles.
Commitment to Education
TSMC Foundation established three educational grant programs to help incubate emerging talents in high
t e c h n o l o g y, corporate management and intellectual property rights. They are: (1) The TSMC Undergraduate
International Exchange Program Scholarship, (2) the TSMC Intellectual Property Scholarship and TSMC Visiting Chair
Professorship and (3) The International MBA (IMBA) program. The first two programs offer major universities in
Taiwan grants for scholarships, lectures and faculty study programs. The third program was newly established in 2001
in collaboration with National Chengchi University's existing IMBA program that aimed to foster the cultivation of
international business leaders.
Contribution to Communities
TSMC Foundation supports community service in both Hsin-Chu and Tainan City, Taiwan, where TSMC's facilities are
located. The Foundation provides funding and also works hand in hand with volunteers to build a better community
for both our employees and our neighbors. The Foundation focuses its attention on art and cultural activities,
environmental protection issues, health care programs, athletic events, as well as other programs to help enhance the
quality of life in those communities.
One of the highlights of the TSMC Foundation's activities in 2001 was the conservation of historic monuments. In
Hsin-Chu City, the Foundation sponsored research projects that helped conserve a temple that stood as a historic
monument and also the publication of Hsin-Chu Historic Sites and Hsin-Chu Historic Map , both edited by the Bureau
of Culture of Hsin-Chu City, to help attract tourists to see the historic side of the city.
In 2001, the TSMC Foundation also teamed up with the Red Cross of the Republic of China (Taiwan) to sponsor a
program entitled the "Training and Service of Home Care for Solitary Senior Citizens", underwriting the training of
some 480 home caretakers in the next three years. Through this program, the Foundation succeeded in putting forth
a model that demonstrated how resources from private sectors, volunteer groups and government agencies could
join hands in servicing senior citizens' living by themselves.
Sponsorship of National Art and Cultural Activities
In 2001, TSMC Foundation made generous contributions to the establishment of the Taipei Contemporary Art
Museum, a concrete gesture that aimed to foster and promote Taiwanese contemporary arts. In addition, the
Foundation was also a major sponsor to "319 Towns in Taiwan", an important national cultural revival project
launched by the Common Wealth Magazine in 2001. The goal of the project was to encourage citizens to target and
explore some of the 319 towns in Taiwan to experience local cultures personally and to help revive them collectively.
Four travel books on these 319 towns in Taiwan were published, serving also as documentation of the much
recognized and appreciated revival project.
T S M C A n n u a l R e p o r t 2 0 0 1
21
22
T S M C A n n u a l R e p o r t 2 0 0 1
OPERATIONAL HIGHLIGHTS
1. Business Activities
1-1 Business Scope
TSMC manufactures semiconductor chips for the world's integrated circuit (IC) companies. The Company focuses
solely on the IC Foundry business, neither manufactures nor markets any branded products of its own. TSMC excels in
every aspect of the IC foundry business, coupling industry-leading process technologies in state-of-the-art, high-
volume wafer manufacturing facilities with unmatched transparency to create world-class customer responsiveness.
TSMC has also developed an industry-leading service organization featuring sophisticated design services, mask
making, and wafer probing capabilities, as well as third-party alliances that match the Company and its customers
with leading developers of electronic design automation (EDA) tools, libraries, intellectual property cores and
assembly and testing services.
As TSMC's capabilities have expanded, customers have come to rely on TSMC to manufacture chips used across the
entire IC application spectrum, including leading-edge microprocessors, graphics chips, wireless IC communications
platforms and programmable logic devices. By its own estimates, TSMC produced about six to seven percent of the
world's supply of ICs in 2001. TSMC's rich portfolio of customers includes nearly every leading integrated device
manufacturer (IDM) and hundreds of highly innovative fabless semiconductor companies.
1-2 Research and Development Plans
R&D Mission and Vision
Semiconductor technology is one of TSMC's core competencies. TSMC's R&D mission is to provide our customers with
the world's leading technology platforms and system-on-a-chip (SoC) solutions for state-of-the-art IC applications.
This enables the Company to offer a broad spectrum of leading edge processes, e.g., logic, mixed-signal/RF,
embedded memory, color image sensor, and high-voltage process technologies. These state-of-the-art processes are
rapidly transferred to volume production, where our customers use them as platforms for the next generation of
computing, graphics, communications (network and wireless), industrial and consumer electronics applications.
Through its innovative and aggressive R&D work, TSMC not only strives to excel in semiconductor technology, but
also helps facilitate that technology to benefit of mankind.
TSMC's research and development commitment is to continue to stay ahead of the International Te c h n o l o g y
Roadmap for Semiconductors (ITRS), extend semiconductor technology as far as the laws of physics allow, and
explore the possibilities inherent in new technologies for future generations of integrated circuits. It is anticipated
that only a handful of IC manufacturing companies worldwide, including TSMC, will have the R&D capability
necessary to support these goals in the future.
TSMC continues to strengthen its global leadership through strategically appropriate partnerships, alliances, and
collaborative activities with world leaders in both the academic and commercial sectors to develop new technologies,
intellectual property (IP), process equipment, materials, and computer-aided design tools. As the sole Ta i w a n e s e
member of International SEMATECH, TSMC hosted the first International SEMATECH board meeting in Taiwan in
2001, clearly demostrating its reputation as the foundry industry R&D l e a d e r. The highly strategic nature of our
collaborative efforts was also raised to a new level in 2001, when TSMC established global alliance in the 90nm
technology generation and set up world-class 90nm ASIC/SoC technology platforms. To date, companies participating
in this effort include leading integrated device manufacturers in Europe, Japan, Taiwan, and the United States.
T S M C A n n u a l R e p o r t 2 0 0 1
23
R&D Organization and Investment
R&D Expense
The success model of TSMC's has attracted the finest domestic and overseas
Amount: NT$K
researchers and technologists to join the Company's R&D task force, whose
collective efforts continue to increase the relative strength and capability of
the Company's R&D team. Already one of the highest-quality and largest-
10,649,019
applied semiconductor research teams in the world, TSMC increased its R&D
7,203,591*
staff by over 25 percent between 2000 and 2001. The Company also
expanded its research scope and manpower investment in exploratory
research for technologies beyond conventional silicon CMOS and bipolar
technologies, such as in 3D structures and novel memory devices for future
1,589,777
SoC applications. A CTO office was established in 2001 to strengthen overall
long term R&D focus as well as to extend technology limits.
2000 2001
Jan. 1 - Feb. 28,
2002
To supplement its R&D talents and skills, TSMC increased its R&D expenditure
*The number of R&D expenditure has been
in 2001 by 47 percent to over NT$10.6 billion. For 2002, this investment is
reclassified to conform to 2001 classification.
expected to exceed NT$9.7 billion.
TSMC has increased significantly its R&D capital investments in 2001 and 2002 for exploratory research and 90nm-
and 65nm-generation technology development. A brand-new billion-dollar (US$) 12-inch-wafer R&D pilot line (part
of the multi-billion dollar Fab 12) was established in 2001. It has an extensive set of advanced and critical R&D tools
for the development of 90nm and 65nm generations, e.g., the industry's first 12-inch high-NA 193nm scanners, high-
k gate dielectric, advanced silicide, Cu, and ultra-low-k interconnect dielectric tools, etc. An exploratory materials pilot
line was established in 2001 to research novel and exotic materials. TSMC has also established a new characterization
lab for low-k dielectrics and other materials; an advanced lithography center; and a process/material simulation lab
that extends its fundamental and exploratory works in semiconductor technology. TSMC valued highly its
development partnerships with and investment in key process tool and materials vendors. These initiatives allow
TSMC to evaluate new materials and tools and accelerate manufacturing cost reduction. The same initiatives have
also led to a variety of intellectual property developments for TSMC, strengthening its leadership in process and
manufacturing technologies as well. Through close collaboration with vendors, TSMC is able to excel in equipment
and materials sciences, providing advanced platforms for technology innovation and production efficiency.
R&D Accomplishments in 2001
One of TSMC's business philosophies is "Unceasing Innovation". Reflecting its commitment to that value, TSMC was
awarded 598 US patents and 861 ROC patents in IC process technology in 2001. TSMC also continued to accelerate
the introduction of new technologies with high speed, maintaining its track record of releasing one technology
generation per year.
TSMC's R&D organization posted many outstanding accomplishments in 2001. Notably, we demonstrated the
feasibility of 90nm CMOS logic for SoC and MPU applications. Featuring sub-8 picosecond transistor gate delays and
1.26um2 and smaller SRAM bit cells, this new process is destined to become a leading SoC platform in the industry.
Furthermore, several breakthroughs were made in demonstrating spin-on and chemical vapor deposition-based low-k
processes with dielectric constants below 2.5 for the 90nm technology node. In addition, high-k gate dielectric
materials were investigated intensively for better device performance.
TSMC has enjoyed an acclaimed reputation for delivering the industry's broadest spectrum of leading-edge processes.
This fact was further evidenced in 2001, as TSMC became the only foundry and one of only two companies
worldwide to manufacture customer products in volume using a 0.13um CMOS logic process.
24
T S M C A n n u a l R e p o r t 2 0 0 1
Our 0.13um process portfolio covers the entire spectrum of SoC applications with a family of high-performance, low
p o w e r, and baseline processes. The high-performance, low-voltage technology is ideal for processor applications
(such as microprocessors, network processors, and media processors). The low-power technology is among the best
available for battery/wireless applications, such as cell phones, while the core or standard logic technology is a cost-
effective option for many industrial and consumer electronics uses. The TSMC 0.13um process also features the most
aggressive design rules in the world, including low-voltage and high-performance transistors with gate lengths of less
than 70nm. Combining these fast transistors with advanced eight-layer copper and low-k interconnects, this
technology is capable of supporting greater than 10-giga-bit-per-second (Gbps) network processors, multi-GHz
microprocessors, and other high performance applications.
Spectrum of New Processes
It is worth noting that all of these developments cited below were achieved despite a sharp industry downturn in
2001. Numerous new process technology options were also introduced in this year.
a. 0.13um Mixed-Signal/RF Technology
TSMC R&D released the industry's first 0.13um mixed-signal/RF CMOS process in 2001. This process features a rich
set of modular digital, analog, and RF devices (supporting 0.13um core, low power and low voltage technologies)
and precision passive components, such as varactors, poly-si resistors, high-Q MIM capacitors and inductors. The
process allows designers to combine logic with base-band, analog and RF features in a single SoC platform for
Bluetooth and other communication applications.
b. SiGe RF BiCMOS Technology
TSMC released the foundry's first 0.35um SiGe RF BiCMOS technology in 2001 and is now developing next
generation 0.18um SiGe RF BiCMOS technology. It features high performance and compatibility with TSMC's
baseline CMOS logic processes, combined with precision RF passive components such as high-Q metal-insulator-
metal capacitors and inductors, and provides RF, analog, and baseband features in a single chip for high speed,
low power, low noise, wired and wireless communication.
c. 0.18um CMOS Image Sensor Process
TSMC's color CMOS image sensor (CIS) process is by far the most advanced technology in the industry. Based on
TSMC's existing 0.80um to 0.25um production technology, the industry's first 0.18um CIS process offers a
competitive pixel size (3.0um pitch) in an integrated technology including color filters and micro-lenses.
d. Embedded Memory Technology
During 2001, TSMC aggressively scaled its embedded memory technologies for SoC integration. These value-added
technologies are fully compatible with their respective core logic platforms and are supported by compilers, design
kits, and test structures for fast time-to-volume. Our embedded 6T SRAM cells are available in a variety of density,
performance, and standby leakage variations. For example, the cell size for our 0.13um-generation 6T SRAM cell is
as small as 2.14um2, with compiler performance capable of greater than 1GHz. We also demonstrated a 1.27um2
6T SRAM cell for our 90nm node in 2001. These cells are also available for stand-alone SRAM devices with high
speed, high bit density or low power consumption. Through our collaboration with Mosys, TSMC delivered
0.25um, 0.18um and 0.15um 1TRAM memory cells to volume production with very good results in 2001. Generic
and ultra-low-power 1TRAM technologies were also verified on multiple versions of TSMC's 0.13um triple-oxide
logic processes with excellent yield results. As a consequence, TSMC became the first foundry to successfully
manufacture 0.13um 1TRAM products.
T S M C A n n u a l R e p o r t 2 0 0 1
25
e. Flash/Embedded Flash Technology
In 2001, TSMC successfully completed product qualification for its 0.25um embedded Flash technology with a
mixed signal option, and successfully entered mass production. A series of Flash and EEPROM-emulator IP blocks
were verified to support a variety of applications ranging from one-time-programmability (OTP) to high-endurance
and high-temperature long-term data retention requirements. TSMC's 0.18um embedded flash, with a mixed-
signal/RF option, was made available at the end of 2001.
f. First 12-inch Production Wafers
In 2001, TSMC's R&D organization played a leading role in the delivery of the foundry industry's first 12-inch
0.15um and 0.13um CMOS logic prototype wafers from the Fab 6 12-inch pilot line in Tainan, as well as the
production of 12-inch 0.15um wafers from Fab 12 in Hsin-Chu. R&D is also actively involved in qualifying 0.13um
production wafers, scheduled for Fab12 delivery in early 2002. The organization is also actively involved in
finalizing the equipment set for the Company's second dedicated 12-inch facility, Fab 14 in Tainan.
g. State-of-the-art Mask Technology
TSMC supports one of the largest in-house mask fabrication capabilities in the world. Our mask shops are known
for excellent quality and cycle time to meet aggressive R&D, prototyping and production requirements. All of our
facilities feature state-of-the-art E-beam mask writers and inspection tools for both R&D and production use,
including advanced optical-proximity-correction (OPC) and phase-shift mask (PSM) technology for 0.13um, and
90nm logic processes.
R&D Plans for 2002
Moving forward, TSMC will continue to increase its R&D personnel and investment while accelerating its R&D
activities. One of TSMC's key focus areas in R&D will be the qualification of 90nm logic/mixed signal technology
platforms and related embedded memory for SoC applications. In addition, the Company will continue development
of its 12-inch equipment set. Other research and development projects will include new 65nm logic technology,
90nm mixed-signal/RF, 0.13um embedded memory, 0.18um SiGe BiCMOS, 0.18um color image sensors, and 0.35um
high-voltage process modules.
TSMC plans to continue to work closely with International SEMATECH and photolithography equipment suppliers to
ensure timely development of 157nm scanners, EUV scanners, and E-beam projection technology to support process
development of sub-90nm technology. By integrating advanced mask and lithography in-house, TSMC can extend its
leadership in micro-patterning technology and manufacturing yield, as well as shorten development and
manufacturing cycle time. In addition, TSMC's R&D team will also engage in exploratory work on processes beyond
the 65nm generation, including geometries as low as 50nm and 35nm. Exploratory work is already under way on
new transistors and process technologies such as SOI, 3D structures, MRAM, and strained-layer CMOS. Attention is
being focused on developing advanced high-k gate insulators and extreme low-k (k<=2.0) interconnect insulator
materials.
With its highly competent and dedicated R&D team and its long-lasting commitment to investment in the most
advanced equipment and materials, TSMC is confident it will continue to deliver the world's best and most cost-
effective SoC processes for its customers.
26
T S M C A n n u a l R e p o r t 2 0 0 1
2. Marketing and Sales
2-1 Achievements in 2001
According to industry analysts, 2001 was the worst year in the history of the IC market, registering a decline of 32
percent. The confluence of global economic recession, significant excess inventories, weaker demand for electronic
equipment, and excess IC manufacturing capacity appears to be the cause. Despite these factors, TSMC performed
better than both the overall semiconductor industry and its competitors in the IC foundry industry.
The global IC industry slowed considerably at the beginning of 2001, prompting TSMC to quickly adjust its expansion
plans, reduce operating costs and expand the availability of advanced processes to maintain its operating margins. As
part of this cost reduction strategy, TSMC restructured operations to improve efficiency but did not lay off any
employees - a unique achievement in 2001 when most IC companies cut costs by downsizing. By keeping our most
valuable resource - the skill and experience of our employees - TSMC has preserved its ability to respond to the
anticipated recovery in 2002.
On capacity expansion, In 2001, TSMC strategically added to its advanced process capacity for geometries of 0.18um
and below. This was accomplished by upgrading facilities that had been tuned to 0.35um and 0.25um processes. To
further bolster deliveries to customers, the Company continued the construction of its two 12-inch facilities, Fab12 in
Hsin-Chu and Fab14 in Tainan, Taiwan, and its joint venture fab with Philips in Singapore, System-on-Semiconductor
Manufacturing Company (SSMC). SSMC entered production in mid-2001, followed by Fab 12 at the end of 2001.
Cleanroom construction for Fab 14 is expected to be completed in the second half of 2002.
In summary, the Company's superior performance can be attributed to three major factors. First, TSMC sustained
strong partnerships with its diverse customer base worldwide through its focus on services. Second, TSMC extended
its leadership in 0.18um, 0.15um and 0.13um processes and expanded its advanced process manufacturing capacity
at multiple 8-inch and 12-inch fabs. Third, TSMC embarked upon a program to set an accelerating pace of
introducing new technologies in anticipation of a stronger and immediate demand for its most advanced processes
and options.
In a year when the overall IC industry was marked by a sharp downturn, and in particular the foundry market, TSMC's
strategy succeeded in maintaining profit while gaining significant shares at the same time. The company estimates
that, on a revenue basis, its share of the dedicated foundry market reached 53 percent in 2001, up from 48 percent
in 2000.
2-2 Market Outlook
Analysts' predictions of the overall IC market growth for 2002 range from a decline of seven percent to an increase of
23 percent. The general consensus forecast for the logic IC market is a growth of approximately ten percent.
However, fabless IC companies, which comprised 66 percent of TSMC's business in 2001, are expected by industry
analysts to grow at nearly twice that rate.
TSMC continues to diversify its customer base while supporting growth for fabless IC companies. Major and long-
term customer prospects have also begun to emerge from the ranks of IDMs. With their established customer bases
and strong product portfolios, these companies can contribute significant acceleration to the foundry industry as
their outsourcing activities increase.
Over the years, TSMC has strategically managed its exposure to the memory market by limiting the commitment of its
memory manufacturing services to a very small percentage of sales revenue. Taking into consideration the highly
T S M C A n n u a l R e p o r t 2 0 0 1
27
focused development of its logic technologies and the high volatility of memory markets in the industry's history,
TSMC will still maintain the policy in 2002, even as it works to expand its share of the emerging markets for
embedded memories and SoC products.
In 2001, TSMC's customer base increased in almost every market, including graphics, broadband communications,
digital consumer electronics, and wireless communications. Many of these markets are high growth segments
demanding advanced manufacturing technologies. New customers utilized large volumes of wafers in 2001 and are
expected to benefit TSMC increasingly over the next several years as these markets continue to grow. End market
leaders such as Altera, ATI, Broadcom, Nvidia, Qualcomm and VIA drive TSMC's demand from the fabless segment,
while leading IDMs such as Motorola and Philips were also significant customers. Through 2002, TSMC will continue
to target marketing efforts to engage customers in similar high growth segments of logic component markets.
TSMC believes that foundry services will play an increasingly important role in the IC industry worldwide. By
definition, fabless companies have all their ICs manufactured by foundries. IDMs are expected to increase their
business relationships with foundries while moving forward. Industry forecasts predict that by 2005, more than 20
percent of worldwide IC production will come from foundries, and increasing to more than 30 percent by 2010.
As design automation and IP integration tools improve, product development risks will decrease, facilitating system
companies to shift their IC needs directly to foundries. TSMC will continue to be a leader in reducing the barriers to
entry for these companies.
At the level of supply chain, TSMC leads the trend toward "disintegration", whereby fables, IDM and system
companies focus on their core competencies, shifting manufacturing and other services to partners with expertise in
foundries, EDA tools, reusable IP, library development, design services and other areas. Enabled by the Internet,
seamless business processes increases the speed at which this trend accelerates, allowing customers and third parties
to work directly with TSMC in a highly transparent operating environment. As TSMC continues to grow, it will also
continue its positive influence in other supply chain partners to expand support for the foundry model. For example,
leading equipment and material suppliers, such as Applied Materials, ASML, Komatsu, Shinetsu, Taisil, and To k y o
Electron, have already begun expanding their technology and service programs targeted to major foundries.
At the technological level, consumer demand for lower cost and higher performance is expected to encourage our
customers to integrate more functionality into their device designs and in turn accelerate the demand for our
advanced technologies. TSMC plans to maintain high average selling prices (ASPs) for wafers by migrating production
capacity to increasingly advanced technologies.
TSMC's competitive landscape is evolving and dynamic. TSMC's current major competitors in the foundry industry
include UMC and Chartered Semiconductor, the number two and three foundry service providers. Anticipating strong
growth of foundry business, new entrants are emerging. TSMC believes that the anticipated high growth of the
foundry business will continue to attract new competitors. However, the current leaders are best positioned to
benefit from fast growth.
Moving into 2002, TSMC will focus on the following technologies:
Advanced Technologies for SoC
During 2001, TSMC delivered the foundry industry's first 0.13um process technology into production and became the
only foundry company manufacturing customer products in volume at this node. With advanced features including
copper interconnects and low-k dielectrics, the process is the most advanced available to designers today. By the end
of 2001, TSMC had delivered 33 fully functional 0.13um devices to its customers and acknowledged more than 60
production tapeouts. Several customers were in volume production and nearly 100 Cybershuttle prototype tapeouts
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T S M C A n n u a l R e p o r t 2 0 0 1
were recorded. The Company expects a smooth ramp to high volume production for its 0.13um process in 2002 and
beyond, when the process will represent a significant portion of overall sales.
TSMC has also made significant inroads into what it expects will be the next-generation SoC platform, the 90nm
process node. Pointing to industry reports that the semiconductor industry will likely rally around only a few
processes at this node, TSMC announced in 2001 an initiative to align first-tier technology companies to its 90nm
process. The alignment is expected to result in nearly identical manufacturing steps carrying the minimum
requirement of a common set of design rules, common electrical parameters, and identical transistor characteristics.
The Company believes that by aligning with a single, open 90nm semiconductor manufacturing process, the IC
industry can efficiently and rapidly build single-chip systems, accelerating innovation across multiple market
segments. TSMC has already reached several agreements with IDMs and major fabless companies in Europe, Japan
and the US by the end of 2001, and expects to begin initial production of its 90nm technology later in 2002.
In addition, the move to a standardized process technology also proved to have a number of other benefits for the
i n d u s t r y. By standardizing, developers of intellectual property can focus their attention on rapid delivery of an
increasing variety of drop-in, reusable IP products. Similarly, designers of libraries - the primary building blocks of
today's ICs - can also target at this single process, eliminating the expense of supporting multiple processes that often
provide only moderate returns on their investments.
In support of its SoC platform initiative, TSMC has dedicated significant resources to the accelerated development of
technology options for its 0.13um and 90nm processes. Such options include mixed-signal/radio frequency (MS/RF),
embedded flash, embedded SRAM, and single-transistor SRAM modules, all of which can be integrated into standard
CMOS logic for complex SoC applications.
MS/RF Pushes the Roadmap Envelope
TSMC's 0.13um MS/RF process leads the industry by several quarters, and is fully compatible with its logic process. It
has attracted numerous advanced designs for the communications market, even as the segment experienced a severe
downturn in general in 2001. We expect the communications market to regain momentum, precipitating another
round of high growth and therefore high-volume use of MS/RF silicon. TSMC will accelerate the development of its
MS/RF process for the 90nm generation, providing significant competitive advantages to its customers in the
communications arena.
Embedded Memory Processes
As an indicator of the strength of the SoC trend, TSMC gained significant business among customers requiring
embedded memory in 2001. TSMC's 0.25um and 0.18um technology processes support embedded flash
( E m b F l a s hT M), embedded single transistor SRAM (Emb1TRAMT M) and embedded 6T/8T SRAMs. TSMC was the first
foundry to bring FlashIPTM and 32-bit RISC intellectual property (IP) cores together in a high performance, integrated
customer product. The higher density embedded memory allows designers to integrate more memory into the same
silicon real estate, significantly increasing performance and functionality. These benefits are increasingly important for
computer, communications, consumer and automotive applications.
Special Logic Processes
In addition to its advanced CMOS logic processes, TSMC has developed a variety of specialty processes, including SiGe
BiCMOS, CMOS image sensor, color filter, and high voltage processes. TSMC became the first foundry to offer SiGe
BiCMOS process, providing high performance and low power consumption for communications applications
including cellular phones and optical networking.
TSMC's development of a 0.35um enhanced version CMOS image sensor process was finished in the third quarter of
2001, while a 0.25um CMOS image sensor process was qualified at the end of 2000 and entered volume production
T S M C A n n u a l R e p o r t 2 0 0 1
29
in the first quarter of 2001. The Company is now engaging in the development of a 0.18um CMOS image sensor
process, which is expected to be completed by the end of 2002 and enter mass production in 2003. TSMC's 8-inch
color filter processes were also available at the end of 2001.
In the realm of high-voltage technology, the development of 0.35um 1-layer-poly, 4-layer-metal CMOS high voltage
and liquid-crystal-on-silicon (LCOS) processes was completed at the end of 2001 and will enter production in the
beginning of 2002.
Premier Foundry Design Services
To facilitate customers' time-to-market, TSMC continues its tradition of providing unrivaled design services through its
Design Service Alliance (DSA). Several alliance groups are included under the DSA umbrella, namely, IP, Library, EDA,
and Design Center third-party partners.
TSMC raised the bar on IP quality in 2001 when it announced a Five Star IP Alliance Program. Under this program, IP
vendors receive a one-star ranking if their IP is verified in TSMC silicon; a three-star ranking if it is implemented in a
customer product; and a five-star ranking if it includes testability structures such as industry-standard JTAG or BIST,
allowing designers to test the IP used in their SoC designs easily.
TSMC's Library Alliance similarly challenged the industry by providing the broadest portfolio of library elements for
TSMC's 0.25um, 0.18um and 0.13um process technologies. At the end of 2001, TSMC had enlisted library developers
to provide more than 100 high-value library elements for its 0.13um process.
TSMC's EDA Alliance was similarly busy, developing strategic thrusts with the leading EDA companies. Chief among its
developments in 2001 was the release of a design reference flow and a variety of design kits allowing designers to
quickly and easily port mixed-signal and RF designs to TSMC silicon using EDA tools from key vendors. TSMC's Design
Center Alliance was also expanded to include 29 members total throughout Asia, Europe and the U.S.
Backend Services
a. Bumping Service
Highly integrated SoC designs increasingly require improved packaging technologies. Flip-chip packaging reduces
overall device size, allows higher I/O counts and enhances overall performance. At the IC manufacturing level, this
requires a new approach to I/O integration and solder bumping. TSMC is the only dedicated foundry to offer in-
house bumping services for flip-chip applications. A turnkey packaging service is also available, featuring solder
bumping, post-bumping wafer sorting, I/O pad redistribution, ground-up design, SPICE model, and back-end
assembly subcontract management. Greatly simplified logistics and shortest possible cycle time were achieved due
to this one-stop service.
TSMC's bumping process was fully qualified in 2001 with advanced technology partners. The bumping facility has
a capacity of 15,000 wafers per month. TSMC's solder bumping services are also available on 0.13um CyberShuttle
prototyping services to qualify customer designs.
For 2002, TSMC will continue to focus on ways to further improve its integrated flip-chip capabilities for advanced
products.
b. Testing Service
TSMC's testing capabilities were advanced on both the engineering and manufacturing fronts in 2001. With the
development of an integrated manufacturing execution system providing up to 12-inch wafer sorting, TSMC has
embarked upon a new manufacturing planning system that is expected to elevate manufacturing efficiency,
delivery and quality. The new system is targeted for implementation in 2002.
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T S M C A n n u a l R e p o r t 2 0 0 1
2-3 Customer Applications
Produced by TSMC's high quality processes, the advanced ICs are designed and marketed by our customers for a
diverse range of end-product applications, including PCs, servers, computer peripherals, Internet appliances, wired
and wireless networking and communication systems, consumer electronics, automotive and industrial equipment.
TSMC is committed to installing sufficient capacity for customers' increasing demands from every application
segment.
2-4 Major Materials Status
Major Materials
Major Suppliers
Market Status
Procurement Strategy
Wafer
MEMC (production plant:
U.S.A. and Taiwan)
SITIX (production plant: U.S.A.
and Japan)
S.E.H. (production plant:
Japan, Malaysia and Taiwan)
Wacker (production plant:
Germany and Singapore)
Chemical
Merck-Kanto (TPS)
Tai-Young High Tech (TYS)
Photoresist
T.O.K.
S.E.H.
Sumitomo
AZ/Clariant
Specialty gas
TAIYO TOYO SANSO
AIR PRODUCT
AIR LIQUID
BOC
These four wafer suppliers combined
provide more than 70 percent of the world's
wafer capacity.
Each supplier has multiple manufacturing
sites, including Asia, Europe and U.S.A. to
meet customer and market demand.
These two companies are worldwide major
bulk chemical suppliers.
The chemical raw materials of these two
suppliers are imported from Japan or Taiwan
local producers, primarily to support the
Taiwan market.
These four companies are worldwide major
photoresist suppliers.
These four suppliers are mutual competitors
in Taiwan market; they all provide JIT service.
These four companies are worldwide major
specialty gas suppliers.
These four suppliers are competitors. There
are other suppliers trying to penetrate the
Taiwan market, which will enable TSMC to
get better commercial terms in future.
TSMC's suppliers of silicon wafer are required to pass stringent quality certification
procedures.
For risk management, we procure wafers from multiple sources to ensure an adequate supply
for volume manufacturing.
TSMC maintains competitive price and service agreements with its wafer suppliers and may
extend this relationship with key suppliers to include strategic and collaborative agreements.
6.TSMC reviews the quality, delivery, cost and service performance of its wafersuppliers,
responding dynamically to these reviews. An annual physical quality system audit for each
wafer supplier ensures that TSMC's quality specifications are maintained.
TSMC's chemicals suppliers have localized many of their operations to be close to our major
manufacturing centers. Because of this, inventory and quality control has improved
significantly. An annual physical quality system audit for chemical suppliers ensures that
TSMC's quality specifications for chemicals are maintained.
TSMC provides a three-month rolling demand forecast to its photoresist suppliers, to provide
them with adequate time to prepare these complex materials. TSMC monitors photoresist
materials status through the monthly inventory reports provided by suppliers. A monthly
physical inventory check at the supplier's warehouse confirms material availability. In addition,
TSMC conducts an annual physical quality system audit for each supplier to ensure photoresist
quality, supply, and availability.
TSMC's four major specialty gas suppliers are located in Japan, the UK and U.S.A., providing
sufficient geographic dispersion to minimize supply risk. These four suppliers compete against
each other in Taiwan market, ensuring competitive pricing and quality service.
Local inventory service ensures that TSMC's demands can be fulfilled; this is backed by monthly
inventory reporting and monitoring.
In addition, TSMC conducts yearly physical quality system audits for each supplier to ensure
specialty gas quality and supply availability.
2-5 Production over the Last Two Years
Year
2000
2001
Capacity
3,263,236
4,378,925
Unit: Capacity and Quantity (8" wafer)/Amount (NT$K)
Wafers
Quantity
3,467,270
2,234,163
Amount
76,545,082
83,741,166
T S M C A n n u a l R e p o r t 2 0 0 1
31
2-6 Net Sales over the Last Two Years
Sales Quantity
& Amount
Year
2001
2000
Local
Export
Local
Export
Unit : Quantity (8" wafer)/Amount (NT$K)
Major
Product
Wafer
Package
Other
Total
Quantity
Amount
Quantity
Amount
Quantity
Amount
Quantity
Amount
539,347
28,267,693
1,544,899
80,969,736
651,604 29,999,959
2,662,803 122,595,893
19,209
1,241,470
55,022
3,556,057
18,418
1,143,289
75,264
4,672,092
12,523
3,067,248
35,871
8,785,799
7,911
1,536,839
32,331
6,280,347
571,079
32,576,411
1,635,792
93,311,592
677,933 32,680,088
2,770,398 133,548,332
3. Personnel Growth over the Last Two Years
Year
Number of Employees
Average Average
Percentage by Education
Direct
Engineer Admin. Manager
Total
Age
Years of
Ph.D. MS/MA
BS/BA
College
High
Others
Total
Labor
2000
7370
5739
2001
6807
5322
02/28/
2002
6625
5267
503
455
453
1024
14636
1092
13676
1083
13428
29
29
30
Service
3.2
4.1
4.3
School
2.2%
23.7%
14.6%
26.3%
33.1%
0.1% 100.0%
2.3%
24.2%
15.0%
25.9%
32.5%
0.1% 100.0%
2.4%
24.4%
14.9%
25.9%
32.3%
0.1% 100.0%
4. Employee Relations
TSMC believes that the future growth of the Company lies largely in the dedication of its employees, and therefore
strives continuously and consistently to create an environment that supports both personal challenge and career
development. As a result, TSMC has maintained one of the highest employee retention rates in the industry.
TSMC's efforts in employee relations have been widely recognized. In 2001, TSMC was the only Taiwanese company
awarded with the "Best Employers in Asia" from a regional study conducted by Asian Wall Street Journal and F a r
Eastern Economic Review. In a "Performance Management" study of high performing Asian Companies conducted by
McKinsey & Company, Inc., TSMC also received high ratings.
Recruiting
TSMC remains organizationally lean and efficient, allowing it to focus continually on the quality and productivity of
its people in preparation to meet future challenges in the industry. The downturn of 2001 has resulted in hiring
freezes and employee layoffs across many semiconductor companies. While implementing a general hiring freeze to
control and manage cost in 2001, TSMC still continued its strategic recruiting for key talents. A total of 450 key
talents were recruited in 2001, 300 of them were brand new graduates from various colleges who were among the
very best in each of their graduating classes.
Development Programs
TSMC fosters a "continuous learning" culture and places strong emphases on employees' growth and development to
ensure that all of them are given the opportunities to maximize their potentials. In 2001, TSMC upgraded the
"Performance Management & Development" (PMD) process to another level with e-PMD, which included the feature
of on-line tracking of "Individual Development Plan" for every employee.
TSMC also conducted more than 1,400 training programs with 37,000 participants in 2001. In addition, more than
55,000 participants have benefited from the newly launched e-learning system. To support organizational
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T S M C A n n u a l R e p o r t 2 0 0 1
development, TSMC also provided tailor-made workshops on the bases of specific requirements from individual work
teams. A total of 52 organizational development workshops were conducted in 2001. To ensure professional
c o m p e t e n c y, each key function also designed their respective learning roadmaps for professional employees to
facilitate individual development planning.
Compensation
TSMC's Total Compensation Program is designed to attract and retain the right kind of talents, motivate them to
perform to their maximum potential, and accomplish the Company's annual as well as long-term objectives. The
program is also designed to reward high performance employees at every level with competitive compensation, with
higher proportion in variable rewards for higher-level positions. The Company believes in "pay by performance"
instead of creating an entitlement mindset. The Company's Total Compensation Program consists of Cash
Compensation and Profit Sharing, the former includes Base Salary and Quarterly Incentive Bonus in cash, and the
latter is delivered in the form of Stock Grants.
a. Base Salary
Base salary is scaled on employee's responsibilities, competencies, and level of contribution. Salaries are reviewed
annually while increases are based on market practice, internal equity, individual responsibility and performance.
b. Quarterly Incentive Bonus
Quarterly Incentive Bonus equivalent to half month's base salary is granted to employees when the Company
meets or exceeds its quarterly financial targets.
c. Profit Sharing
Eight percent of the Company's annual distributable income (net of legal reserve) is reserved for the Profit Sharing
Plan for employees. This is awarded in the form of new issues of common shares to all employees, hence making
every TSMC employee a shareholder of the Company. The size of individual awards is determined the individual's
level of responsibility, and most importantly his/her performance and contribution. The value of the plan
constitutes a very significant portion of the total compensation, especially for managers and executives. The
Company encourages employees to hold the stocks and earn under the program, and therefore their long-term
incentive is directly tied to creating shareholder value.
Benefits
TSMC provides a highly competitive benefit plan that covers both our employees and their families. Besides
competitive medical and insurance coverage, TSMC also provides facilities including on-site sports and health
facilities, clinics, canteens, coffee bars, convenience stores, bookstores, laundry services, child care center,
dormitories, etc. Through our very active Employee Welfare Committee, a variety of activities were planned
throughout the year. Highlights in 2001 included the favorite Sports Day and the Spring Concert, each bringing more
than 10,000 employees and their families together in great team and community spirit.
5. Environmental Protection Measures
TSMC has always had its own rigorous principles of Environmental, Safety and Health (ESH) Po l i c y. It has been in
complete compliance with Taiwan Environmental Protection Administration (EPA) regulations and has also
maintained international environmental standards. The Company has always contributed significant resources into
ESH improvement programs and these efforts have not only led to recognition from the government but also have
earned TSMC two national awards. They are the "Energy Conservation Excellence Award" from the Ministry of
Economic Affairs, and the "Pollution Control Equipment Maintenance Outstanding Performance Plant Award" from
the Industry Development Bureau.
T S M C A n n u a l R e p o r t 2 0 0 1
33
Moreover, TSMC has also observed international environmental measures over the years. With the ISO (International
Organization for Standardization) 14001 as the international standard for environmental management, TSMC is
proud to report that its Fabs 1, 2, 3, 4, 5 and 7 have been ISO 14001-certified since 1996, while Fab 6 and 8 received
ISO 14001 certification in 2001. In addition, TSMC's Fab 1, 2, 3, 4 and 5 were also OHSAS (Occupational Health and
Safety Assessment Series) 18001-certified in 2000, making TSMC Taiwan's first semiconductor industry to receive
OHSAS certification. Subsequently, the Company's Fab 6, 7 and 8 also received OHSAS 18001 certification in 2001.
TSMC's ESH improvement programs in 2001 included the following:
Energy Conservation
TSMC's continuous energy conservation and improvement programs include clean-room HEPA velocity reduction,
process exhaust reduction, and lighting management.
Water Pollution Control
TSMC continues to make efficiency improvements to our plants' wastewater treatment facilities that result in
significantly cleaner effluent than the current wastewater quality standards. For example, we have set up a new
wastewater recovery system and modified existing systems to improve the water recovery ratio.
Air Pollution Control
TSMC not only installed air pollution prevention facilities to meet new environmental standards, but also
implemented backup facilities in 2001 to reduce environmental impact in case of equipment failure.
Waste Management
Recycling has been an ever-ongoing goal. In 2001, TSMC received the EPA approval to recycle calcium fluoride sludge,
waste solvent and sulfuric acid.
TSMC was the first to publish a Corporate Environmental Report (CER) in Taiwan's semiconductor industry in April
2000. In 2001, TSMC added new safety and health sections to the content and published the first "TSMC
Environmental, Safety and Health (ESH) Annual Report". TSMC believes that its Corporate ESH Report is a very
important component of the corporation's social commitment, and hopes the report also serves as a communication
channel to all interested parties.
TSMC is fully aware of its commitment and responsibility in environmental protection to the society and will continue
to channel significant resources into its environmental protection measurements and relevant company polices.
Other Disclosures
TSMC has always worked in complete compliance with Taiwan's EPA regulations and received no citations or penalties
for non-compliance or hazardous incidents from 2001 until February 28, 2002. Nevertheless, TSMC plans to invest
approximately NT$399 million in additional improvements to its pollution control equipment for manufacturing
facilities over the next three years.
6. Important Contracts
Technology Cooperation Agreement
Term of Agreement: 07/09/1997 - 07/08/2007
Contracting Party: Philips Electronics N.V. (now renamed Koninklijke Philips Electronics N.V.) (Philips)
Summary: Under this agreement, TSMC is obliged to pay to Philips royalties at a fixed percentage of net sales for
certain products.
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T S M C A n n u a l R e p o r t 2 0 0 1
Building and Equipment Leasing Agreement (Fab 1)
Term of Agreement: 04/01/1997 - 03/31/2002
Contracting Party: Ministry of Economic Affairs
Summary: Under this agreement, TSMC leases certain buildings and equipment from the Ministry of Economic
Affairs.
Land and Public Facility Leasing Agreement (Fab 1)
Term of Agreement: 04/01/1997 - 03/31/2002
Contracting Party: Industrial Technology Research Institute (ITRI)
Summary: Under this agreement, TSMC leases certain land and public facilities from ITRI.
Foundry Related Agreements
Term of Agreement: 1995 - 2004
Contracting Parties: More than 10 companies in Asia, Europe, and the U.S.A.
Summary: Under these agreements, TSMC guarantees a pre-determined capacity for a set number of years to
customers who deposit certain fees with TSMC.
Manufacturing Agreement
Term of Agreement: 02/16/1996 - 12/31/2005, automatically renewed for one year unless terminated with a six-
month prior written notice by TSMC.
Contracting Party: WaferTech, LLC
Summary: Under this agreement, TSMC has the right to purchase the entire calculated installed capacity of
WaferTech, LLC during the production period.
Shareholders Agreement
Term of Agreement: Effective as of 03/30/1999 and may be terminated as provided in the agreement.
Contracting Parties: Philips Electronics N. V. (now renamed Koninklijke Philips Electronics N.V.) (Philips) and EDB
Investments Pte Ltd. (EDBI)
Summary: Under this agreement, TSMC, Philips and EDBI agreed to form a joint venture "Systems on Silicon
Manufacturing Company Pte Ltd." (SSMC) to build an IC foundry in Singapore. TSMC holds 32 percent of the shares.
Philips and TSMC are committed to purchasing a certain percentage of SSMC's capacity.
Technology Cooperation Agreement
Term of Agreement: 03/30/1999 - 03/29/2009
Contracting Party: Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
Summary: Under this agreement, TSMC shall transfer its certain process technologies to SSMC and SSMC shall pay
TSMC remuneration at a certain percentage of the net selling prices of its products.
Technology Transfer Agreement
Term of Agreement: 06/27/2000 - 06/26/2010
Contracting Party: National Semiconductor Corporation (NS)
Summary: Under this agreement, TSMC shall transfer its process technologies to NS and NS shall pay license fees to
TSMC.
Manufacturing Agreement
Term of Agreement: 02/14/2000 - 12/13/2005
Contracting Party: Vanguard International Semiconductor Corporation (VIS)
Summary: Under this agreement, VIS shall reserve a certain capacity to manufacture certain TSMC devices required by
TSMC's customers, at prices as agreed upon by the parties involved.
T S M C A n n u a l R e p o r t 2 0 0 1
35
Patent License Agreement
Term of Agreement: 10/26/2001 - 12/31/2006
Contracting Party: A U.S. based company
Summary: Under this agreement, the parties have entered into cross license arrangements for certain semiconductor
patents. TSMC shall pay license fees to the said company.
7. Litigation Proceedings
Antidumping Investigation Against SRAMs
Micron Technology Inc. (Micron) filed a petition for antidumping investigation against SRAMs from Korea and Taiwan
in February 1997. Following the U.S. International Trade Commission's (ITC) final determination in April 1998 that U.S.
industry is materially injured by imports from Taiwan, the U.S. Department of Commerce announced the antidumping
duty order. Taiwan industry subsequently appealed the ITC's determination to the U.S. Court of International Trade
(CIT). In June 2000, ITC, pursuant to CIT's second remand order, voted that SRAMs from Taiwan are not causing or
threatening to cause injury to the U.S. industry, which decision was later affirmed by CIT. Micron then appealed to
the U.S. Court of Appeals for the Federal Circuit (CAFC). In September 2001, CAFC upheld CIT's decision. ITC appealed
in November 2001 requesting CAFC to review its decision, which was subsequently denied by CAFC in December
2001. ITC and Micron are entitled to appeal the CAFC's decision to the U.S. Supreme Court by March 4, 2002. If both
ITC and Micron do not appeal by that time, the entire SRAM antidumping investigation will be terminated.
8. Notes on Board and Shareholders
Articles of Incorporation
TSMC's Articles of Incorporation have been drafted and revised based on the Company Law and other relevant
regulations of the Republic of China (for more details, please refer to http://www.tsmc.com).
To accommodate the need for capitalization of 2000 profits, it was resolved at the Regular Shareholders' Meeting of
May 15, 2001 that TSMC's Articles of Incorporation be revised to raise the authorized capital from NT$178 billion to
NT$246 billion.
Shareholders' Meeting
Meetings of TSMC's shareholders include Regular Shareholders' Meeting and Special Shareholders' Meeting. The
Regular Shareholders' Meeting is convened by the Board of Directors in accordance with the Company Law of the
Republic of China and generally held in Hsin-Chu, Taiwan, where TSMC's head office is located, within six months
after the end of each fiscal year. Special Shareholders' Meeting may be convened by resolution of the Board of
Directors whenever it deems necessary. Under certain circumstances, Special Shareholders' Meeting may be convened
by shareholders or supervisors in accordance with the law.
For a public company such as TSMC, notice in writing of shareholders' meetings, stating the place, time and purpose
thereof, must be sent to each shareholder at least thirty days (in the case of regular meetings) or fifteen days (in the
case of special meetings) prior to the date of each meeting.
Shareholders' meetings of TSMC are conducted in accordance with TSMC's "Rules and Procedures of Shareholders'
Meeting" and relevant laws, rules and regulations (for more details, please refer to http://www.tsmc.com).
In accordance with the "Rules and Procedures of Shareholders' Meeting", the agenda of the shareholders' meeting is
set by the Board of Directors if the Meeting is convened by the Board of Directors and the Meeting shall proceed in
accordance with the agenda. However, shareholders may make special motion during the shareholders' meeting.
When a shareholder present at the shareholders' meeting wishes to speak, a Speech Note should be filled out with
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T S M C A n n u a l R e p o r t 2 0 0 1
summary of the speech, the shareholder's number (or the number of Attendance Card) and the name of the
shareholder.
TSMC's 2001 Regular Shareholders' Meeting was held at the Auditorium in the Activity Center of Hsin-Chu Science-
Based Industrial Park on May 15, 2001, in which the shareholders present in person or by proxy resolved to accept
the 2000 Business Report and Financial Statements, approve the proposal for the distribution of 2000 profits, the
capitalization of 2000 profits, and the revision of the Articles of Incorporation of TSMC.
Board of Directors
TSMC's directors and supervisors are elected in accordance with the Company Law of the Republic of China and
TSMC's "Rules for Election of Directors and Supervisors" (for more details, please refer to www.tsmc.com). Other than
those provided in the Company Law of the Republic of China, TSMC does not have special provisions for nominating
directors or supervisors by any shareholder.
During 2001 and the period from January 1, 2002 to February 28, 2002, five regular meetings and three special
meetings of TSMC's Board of Directors were held and the following resolutions were passed:
Approving 2000 Business Report and Financial Statements, the proposal for distribution of 2000 profits, 2001 normal
capital expenditure, capital expenditure for setting up a solder bumping line, the revision of Articles of Incorporation,
the convention of 2001 Regular Shareholders' Meeting and the agenda thereof, TSMC's sponsoring the issuance of
ADRs by certain shareholders, the appointment of Dr. C.S. Hsu as Vice President, 2001 Financial Forecast, the increase
of investment in TSMC Japan K.K., the sale of all TSMC's shareholding in Taiwan Semiconductor Te c h n o l o g y
Corporation to Amkor Technology Inc., the semi-annual Financial Statements for the first half of 2001, the
appointment of Dr. F.C. Tseng as Deputy Chief Executive Officer, the appointment of Dr. Rick Tsai as President & Chief
Operating Officer, the appointment of Dr. Kenneth L. Kin as Senior Vice President, the appointment of Dr. Chenming
Hu as Chief Technology Officer, the promotion of Mr. M.C. Tzeng as Vice President, and the revision of TSMC's 2001
Financial Forecast; authorizing the Chairman to decide, within the limit of NT$15 billion, the issuance of Corporate
Bond in the domestic market; approving the second revision of 2001 Financial Forecast, 2001 Business Report and
Financial Statements, the proposal for distribution of 2001 profits, the convention of 2002 Regular Shareholders'
Meeting and the agenda thereof, 2002 normal capital appropriation, capital appropriation for expanding the capacity
for the advanced processes and conducting Fab 12's mechanical and electrical related constructions, increase of
investment in TSMC Development, Inc. and WaferTech, LLC, and the appointment of Dr. Richard L. Thurston as Vice
President and General Counsel, etc.
9. Acquisition or Disposition of Real Estate
9-1 Amount of acquisition real estate up to NT$300 million or 20% of paid in capital
As of 02/28/2002
Unit: NT$K
Name of Real Estate
Acquisition Date
Price
Vendor
Relationship with Co.
Purpose
Fab6 Gas System & Piping
Stepper
Stepper
Stepper
EBO
Process Hook-Up, SP2
Process Hook-Up, SP2
01/31/2001
07/31/2001
07/31/2001
11/30/2001
06/30/2001
03/16/2001
01/31/2001
382,619
334,959
315,860
339,744
411,886
471,171
461,021
SAN FU
ASML
ASML
ASML
Toshiba
Zhurong
Tungkai
None
None
None
None
None
None
None
For in house
For in house
For in house
For in house
For in house
For in house
For in house
9-2 Amount of disposition real estate up to NT$300 million or 20% of paid in capital: None
T S M C A n n u a l R e p o r t 2 0 0 1
37
FINANCING PLANS AND
I M P L E M E N T A T I O N
1. Preferred A Shares
1-1 Financing Plans
a. Source of Funds
Issuance
Preferred A Shares
Issuing Date
11/29/2000
Tenor
2.5 Years
Rate
3.50%
Outstanding
1,300,000,000 Shares
b. Use of Funds
Project
Use of Proceeds
Complete
Amount
Expending Plan
Date
2001
Q1
Q2
Q3
Q4
Unit: NT$K
2002
Q1
Fab 12
Procurement of
03/31/2002
13,000,000
825,000
1,650,000
2,475,000
3,300,000
4,750,000
Equipment
c. Date of posting on TSE's Web Site: 09/22/2000 (Approval date by the Securities and Futures Commission)
1-2 Status of Implementation & Benefits
a. As of Dec. 31, 2001, complete 63.64% compares with expending plan.
b. Commenced Pilot Run in 2001 and expect to benefit starting 2002.
2. Corporate Bond
2-1 Financing Plans
a. Source of Funds
Issuance
Issuing Date
Tenor
Coupon Rate (or YTM)
Outstanding
Corporate
Bond
01/10/2002 -
01/24/2002
Class A: 5 years
Class B: 7 years
Class C: 10 years
Class A: 2.6% p.a.
Class B: 2.75% p.a.
Class C: 3.00% p.a.
Class A: NT$ 2.5 billion
Class B: NT$ 8.0 billion
Class C: NT$ 4.5 billion
b. Use of Funds
Project Use of Proceeds Complete
Amount
Expending Plan
Date
2002
2003
Q1
Q2
Q3
Q4
Q1
Q2
Fab 14
Procurement of 06/30/2003
15,000,000
1,017,000
629,000
833,000
799,000
369,000
11,353,000
Equipment
Unit: NT$K
c. Date of posting on TSE's Web Site: 12/17/2001 (Approval date by the Securities and Futures Commission)
2-2 Status of Implementation & Benefits: Commencing from 2002 and expect to benefit starting 2003.
38
T S M C A n n u a l R e p o r t 2 0 0 1
T S M C A n n u a l R e p o r t 2 0 0 1
39
40
T S M C A n n u a l R e p o r t 2 0 0 1
FINANCIAL INFORMATION
T S M C A n n u a l R e p o r t 2 0 0 1
41
1. Condensed Balance Sheet
Financial analysis from 1997-2001
Item
1997
1998
1999
2000
2001
Current assets
23,790,795
26,378,422
38,770,670
85,950,586
63,652,726
Long-term stock investments
19,220,371
17,537,765
28,208,643
33,422,010
32,869,391
Unit: NT$K
Fixed assets
Other assets
Current liabilities
Before distribution
After distribution
Long-term liabilities
Other liabilities
Capital stock
Capital surplus
Retained earnings
Before distribution
After distribution
61,697,723
73,636,209
89,566,029 207,005,370 215,499,242
3,804,923
6,554,817
4,877,392
14,594,492
23,713,325
10,088,672
8,138,796
14,469,329
41,188,662
25,210,619
10,250,285
8,276,867
14,684,480
41,814,102
*
20,009,357
25,025,206
20,000,000
29,000,000
24,000,000
9,001,390
6,872,545
6,183,565
9,030,097
9,333,990
40,813,000
60,471,760
76,708,817 129,893,646 181,325,531
62,082
164,219
11,831,411
55,285,821
57,128,433
28,641,292
24,162,113
33,320,615
76,924,173
37,507,410
8,820,919
9,010,971
11,785,153
24,866,848
*
-
Unrealized loss on long-term investment
-
-
-
(71,564)
Cumulative transaction adjustments
(101,981)
(727,426)
(101,981)
(278,377)
1,228,701
Total Assets
Total Liabilities
Before distribution
After distribution
Total Equity
Before distribution
After distribution
108,513,812 124,107,213 161,422,734 340,972,458 335,734,684
39,099,419
40,036,547
40,652,894
79,218,759
58,544,609
39,261,032
40,174,618
40,868,045
79,844,199
*
69,414,393
84,070,666 120,769,840 261,753,699 277,190,075
69,252,780
83,932,595 120,554,689 261,128,259
*
*Subject to change after shareholders' meeting resolution
42
T S M C A n n u a l R e p o r t 2 0 0 1
2. Condensed Statement of Income
Financial analysis from 1997-2001
Item
1997
1998
1999
2000
2001
Unit: NT$K (Except EPS: NT$)
Net sales
Gross profit*
Income from operations
Non-operating Income
Non-operating Expense
Interest revenue
Interest expense
Income from operations of
43,935,627
50,233,008
73,131,206 166,228,420 125,888,003
20,134,920
20,336,042
32,215,693
75,996,839
36,381,051
15,489,780
16,202,245
25,916,619
60,541,105
17,342,286
857,713
1,024,981
1,249,706
5,409,307
2,891,557
830,390
501,434
546,490
287,295
3,056,460
2,112,818
9,575,128
566,020
808,616
1,575,460
1,365,919
981,388
1,415,527
1,858,197
1,951,830
continued segments-before tax
15,517,103
13,648,622
24,109,865
63,837,594
10,658,715
Income from operations of
continued segments-after tax
Income from
operations of discontinued segments
Extraordinary gain (loss)
Cumulative effect of
changes in accounting principles
Earnings per share
Capitalized interest
17,960,075
15,344,203
24,559,884
65,106,194
14,483,174
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.40 **
1.83 ***
255,054
2.54 **
1.56 ***
661,414
3.24 **
2.49 ***
305,312
5.71 **
3.96 ***
0.83 **
72,903
207,297
Certain accounts of 1997 through 2000 hae been reclassified to conform to 2001 classifications
*
** Based on weighted average shares outstanding in each year
***Retroactive adjustment for capitalization of unappropriated earnings and bonus to employees
T S M C A n n u a l R e p o r t 2 0 0 1
43
3. Financial Analysis
Financial analysis from 1997-2001
Capital
Debts ratio(%)
1997
36.03
1998
32.26
1999
25.18
2000
23.23
2001
17.44
Structure Analysis Long-term fund to fixed assets (%)
144.94
148.16
157.17
140.46
139.76
Liquidity Analysis Current ratio (%)
235.82
324.11
267.95
208.68
252.48
Quick ratio (%)
185.78
273.86
233.95
178.13
211.92
Times interest earned (times)
Operating
Average collection turnover(times)
Performance
Average collection days
20.04
6.22
8.91
5.90
58.68
61.85
Analysis
Average inventory turnover (times)
6.12
6.82
Average inventory turnover days
59.69
53.49
Average payment turnover (times)
Fixed assets turnover (times)
Total assets turnover (times)
Profitability
Return on total assets (%)
2.37
0.71
0.41
20.35
Analysis
Return ratio on stockholders' equity (%)
29.56
Operating income to capital stock(%)
Profit before tax to capital stock (%)
Profit after tax to net sales (%)
Net worth per share (NTD)
37.95
38.02
40.88
2.53
0.68
0.40
14.04
19.99
26.79
22.57
30.55
Earnings per share (NTD)
1.27
1.08
Dividends per share (NTD)
Cash dividends (NTD)
Stock dividends (NTD)
14.83
7.18
50.82
9.96
36.66
3.02
0.82
0.45
18.19
23.98
33.79
31.43
33.58
15.74
1.73
2.30
34.02
7.70
47.42
10.77
33.90
2.69
0.80
0.49
24.12
31.43
46.61
49.15
39.17
21.28
3.96
2.80
5.84
5.32
68.61
9.19
39.70
2.88
0.58
0.37
4.76
5.37
9.56
5.88
11.50
15.70
0.83
4.00
2.30
2.80
4.00
Cash flow
Cash flow ratio (%)
201.55
417.00
273.50
213.17
284.27
Cash flow adequacy ratio (%)
97.96
102.04
106.00
106.03
105.73
Cash flow reinvestment ratio (%)
16.28
21.65
19.31
22.47
16.00
Leverage
Operating leverage
Financial leverage
*Subject to change after shareholders' meeting resolution
**The calculation formula of financial analysis was listed as follows :
1. Capital Structure Analysis
2.15
1.04
2.69
1.06
2.47
1.06
2.34
1.03
2.34
1.13
4. Profitability Analysis
(1) Debts ratio
= Total Liabilities / Total Assets
(1) Return on total assets
= {Net Income + Interest Expenses * (1 - Effective tax rate )} /
(2) Long-term fund to fixed assets
= (Shareholders' Equity + Long-term Liabilities)/
Average Total Assets
2. Liquidity Analysis
(1) Current ratio
(2) Quick ratio
Net Properties
= Current Assets / Current Liabilities
= (Current Assets - Inventories - Prepaid Expenses) /
Current Liabilities
(3) Times interest earned
= Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Average collection turnover
= Net Sales / Average Trade Receivables
(2) Average collection days
= 365 / Receivables Turnover rate
(3) Average inventory turnover
= Cost of Sales / Average Inventory
(4) Average inventory turnover days = 365 / Inventory Turnover rate
(5) Average payment turnover
= Cost of Sales / Average Trade Payables
(6) Fixed assets turnover
(7) Total assets turnover
= Net Sales / Net Properties
= Net Sales / Total Assets
(2) Return ratio on stockholders' equity = Net Income / Average Shareholders' Equity
(3) Profit after tax to net sales
= Net Income / Net Sales
(4) Earnings per share
= (Net Income - Preferred Stock Dividend) /
Weighted Average Number of Shares Outstanding
5. Cash flow
(1) Cash flow ratio
= Net Cash Provided by Operating Activities / Current Liabilities
(2) Cash flow adequacy ratio
= Five-year sum of cash from operations / Five-year sum of capital
(3) Cash flow reinvestment ratio
= (Cash Provided by Operating Activities - Cash Dividends) /
expenditures, inventory additions, and cash dividends
(Gross Plant + Investment + Other Assets + Working Capital)
6. Leverage
(1) Operating leverage
(2) Financial leverage
= (Net Sales - Variable Cost) / Income from Operations
= Income from Operations /
(Income from Operations - Interest Expenses)
44
T S M C A n n u a l R e p o r t 2 0 0 1
4. 2001 Condensed Interim Balance Sheet by Quarterly
March 31, 2001
June 30, 2001
September 30, 2001
December 31, 2001
Unit:NT$K
ASSEETS
Amount
%
Amount
%
Amount
%
Amount
%
Current assets
73,631,544
22
64,793,235 19
54,110,594
Long-term investments
33,064,544 10
34,718,514 10
33,950,449
Fixed assets
Other assets
211,037,780 62
216,594,103 64
219,577,703
19,959,232
6
21,949,461
7
25,924,873
16
10
66
8
63,652,726
19
32,869,391 10
215,499,242 64
23,713,325
7
TOTAL ASSETS
337,693,100 100
338,055,313 100
333,563,619 100
335,734,684 100
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term liabilities
Other liabilities
Total liabilities
29,863,304
29,000,000
8,810,582
9
8
3
28,854,509
29,000,000
9,216,070
8
9
3
23,073,125
29,000,000
9,323,880
7
8
3
25,210,619
24,000,000
9,333,990
7
7
3
67,673,886 20
67,070,579 20
61,397,005
18
58,544,609 17
SHAREHOLDERS' EQUITY
Capital stock
Capital surplus
129,893,646 39
181,325,531 54
181,325,531
55,285,821 16
55,285,821 16
55,285,821
Retained earnings:
85,344,547 25
33,599,624 10
34,836,301
Cummulative
translation adjustments
(13,180)
Unrealized loss on
long-term investment
(491,620)
-
-
(32,118)
805,876
-
-
(167,908)
886,869
55
17
10
-
-
181,325,531 54
57,128,433 17
37,507,410 11
-
1,228,701
-
1
Total Shareholders'
Equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
270,019,214 80
270,984,734 80
272,166,614
82
277,190,075 83
337,693,100 100
338,055,313 100
333,563,619 100
335,734,684 100
T S M C A n n u a l R e p o r t 2 0 0 1
45
5. 2001 Condensed Interim Statement of Income by Quarterly
Q1
Q2
Q3
Q4
Total
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Unit:NT$K (Except EPS:NT$)
GROSS SALES
40,226,483
26,694,430
28,191,557
33,451,349
128,563,819
SALES RETURNS
AND ALLOWANCES
NET SALES
COST OF SALES
GROSS PROFIT
(705,737)
(396,681)
(1,251,665)
(321,733)
(2,675,816)
39,520,746 100
26,297,749 100
26,939,892
100
33,129,616 100
125,888,003 100
OPERATING EXPENSES
4,221,116 10
4,714,140 18
4,873,671
26,043,096
66
21,299,201
81
20,124,129
13,477,650 34
4,998,548 19
6,815,763
75
25
18
22,040,526 67
89,506,952
71
11,089,090 33
36,381,051
29
5,229,838
16
19,038,765 15
9,256,534 24
284,408
1
1,942,092
7
5,859,252 18
17,342,286 14
INCOME FROM
OPERATIONS
NON-OPERATING INCOME
Interest
445,307
1
430,365
2
302,913
1,365,919
1
Insurance compensation
14,864
-
-
-
1,037
27,403
116,113
-
-
-
214,835
71,148
73,847
-
64,554
524,725
1
574,918
2
662,743
1,522,366
4
1,232,975
5
1,926,187
447,936
328,706
52,670
2,351,678
1
1
-
6
420,425
2
529,618
4,114
70,832
-
-
113,906
235,382
1,728,346
7
2,805,093
10
2,690,011
1
1
-
-
2
7
2
-
-
187,334
630,099
136,181
175,557
1
2
-
-
860,835
234,732
430,071
1,129,171
2
2,891,557
1,748,103
5
6,429,631
553,851
248,894
139,163
2
1
-
8
1,951,830
695,620
498,047
9,575,128
1
-
-
2
5
2
1
-
8
7,429,581 19
(869,020)
(3)
(200,258)
(1)
4,298,412 13
10,658,715
8
Premium income
Other
Total Non-Operating
Income
NON-OPERATING EXPENSES
Equity in net loss of
investee companies -net
Interest
Foreign exchange loss-net
Other
Total Non-Operating
Expenses
INCOME BEFORE
INCOME TAX
INCOME TAX BENEFIT
990,793
2
1,181,422
4
1,436,935
5
215,309
1
3,824,459
3
NET INCOME
8,420,374 21
312,402
1
1,236,677
5
4,513,721 14
14,483,174 12
EARNINGS PER SHARE
0.71
(0.20)
0.06
0.26
0.83
46
T S M C A n n u a l R e p o r t 2 0 0 1
6. Auditors' Opinion from 1997 to 2001
Year
1997
1998
1999
2000
2001
CPA
S.C. Huang, Edward Way
S.C. Huang, Edward Way
S.C. Huang, Edward Way
S.C. Huang, Edward Way
S.C. Huang, Edward Way
Audit Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
12F, No. 156, Sec. 3, Min-Sheng E. Rd., Taipei, Taiwan, R.O.C.
Tel : 886-2-2545-9988
7. Supervisors' Report
The Board of Directors have prepared and submitted to us the Company's 2001 Business Report, Financial
Statements, and proposal for allocating profits. The CPAs of T. N. SOONG & CO. were retained to audit the Financial
Statements and have submitted a report relating thereto. The above Business Report, Financial Statements and
proposal have been further examined as being correct and accurate by the undersigned, the supervisors of Taiwan
Semiconductor Manufacturing Company Limited. According to Article 219 of the Company Law, we hereby submit
this report.
Taiwan Semiconductor Manufacturing Company Limited
Supervisor
Robbert Brakel
Supervisor
George C. Shiu
Supervisor
S. J. Paul Chien
March 11, 2002
T S M C A n n u a l R e p o r t 2 0 0 1
47
8. Review and Analysis of Financial Position and Operating Results
(1) Liquidity analysis
Item
Current ratio
Quick ratio
(2) Analysis of Operating Result
Item
GROSS SALES
Dec. 31, 2001
Dec. 31, 2000
252.48%
211.92%
208.68%
178.13%
Change %
20.99
18.96
Unit: NT$K
2001
2000
Change Amount
Change %
128,563,819
169,223,128
(40,659,309)
SALES RETURNS AND ALLOWANCES
(2,675,816)
(2,994,708)
318,892
NET SALES
COST OF SALES
GROSS PROFIT
125,888,003
166,228,420
(40,340,417)
(89,506,952)
(90,231,581)
724,629
36,381,051
75,996,839
(39,615,788)
OPERATING EXPENSES
(19,038,765)
(15,455,734)
(3,583,031)
INCOME FROM OPERATIONS
17,342,286
60,541,105
(43,198,819)
NON-OPERATING INCOME
Interest
Insurance compensation
Premium income
Technical service income
Gain on sales of property, plant and equipment
Gain on sales of short-term investments
Foreign exchange gain- net
Equity in net income of investee companies - net
Other
1,365,919
860,835
234,732
55,077
52,376
-
-
-
322,618
1,575,460
1,623,832
8,115
23,557
62,921
104,643
828,025
779,326
295,295
(209,541)
(762,997)
226,617
31,520
(10,545)
(104,643)
(828,025)
(779,326)
27,323
Total Non-operating Income
2,891,557
5,301,174
(2,409,617)
NON-OPERATING EXPENSE
Equity in net loss of investee companies -net
(6,429,631)
-
(6,429,631)
Interest
Foreign exchange loss-net
(1,951,830)
(1,858,197)
(695,620)
-
(93,633)
(695,620)
Loss on sales and provision for loss on property,
plant, and equipment
Loss on sales of long-term investments
Amortization of bond issue cost
Other
(234,862)
(102,978)
(12,504)
(147,703)
(99,220)
(135,642)
136.71
(32,658)
(14,610)
20,154
(133,093)
Total Non-operating Expense
(9,575,128)
(2,004,685)
(7,570,443)
INCOME BEFORE INCOME TAX
10,658,715
63,837,594
(53,178,879)
-83.30
INCOME TAX BENEFIT
3,824,459
1,268,600
2,555,859
201.47
NET INCOME
14,483,174
65,106,194
(50,623,020)
-77.75
48
T S M C A n n u a l R e p o r t 2 0 0 1
-24.03
-10.65
-24.27
-0.80
-52.13
23.18
-71.35
-13.30
-46.99
2792.57
-
-16.76
-100.00
-
-
9.25
-45.45
-
5.04
-
-
-61.71
910.97
377.64
9. Financial Statements & Independent Auditors' Report
English Translation of a Report Originally Issued in Chinese
Independent Auditors' Report
January 18, 2002
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Ltd.
We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Ltd. as of
December 31, 2001 and 2000, and the related statements of income, changes in shareholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Regulations for Auditing of Financial Statements by Certified Public
Accountants, and auditing standards generally accepted in the Republic of China. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of Taiwan Semiconductor Manufacturing Company Ltd. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with the Guidelines for Securities Issuers'
Financial Reporting and accounting principles generally accepted in the Republic of China.
We have also audited the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Ltd.
as of and for the years ended December 31, 2001 and 2000, and have expressed an unqualified opinion on such
financial statements.
Notice to Readers
The accompanying financial statements are intended only to present the financial position, results of operations and
cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and
not those of another jurisdictions. The standards, procedures and practices to audit such financial statements are
those generally accepted and applied in the Republic of China.
T S M C A n n u a l R e p o r t 2 0 0 1
49
English Translation of Financial Statements Originally Issued in Chinese
BALANCE SHEETS
December 31, 2001 and 2000
(In Thousand New Taiwan Dollars, Except Par Value)
ASSETS
CURRENT ASSETS
2001
2000
Amount
%
Amount
%
Cash and cash equivalents (Notes 2 and 3)
$33,403,706
10
$35,664,440
11
Receivable from related parties (Note 12)
Notes receivable
Accounts receivable
Allowance for doubtful receivables (Note 2)
Allowance for sales returns and others (Note 2)
Inventories - net (Notes 2 and 4)
Deferred income tax assets (Notes 2 and 11)
Prepaid expenses and other current assets (Notes 2 and 12)
Total Current Assets
523,861
176,582
19,957,636
(1,100,492)
(2,581,551)
8,504,418
2,347,000
2,421,566
63,652,726
LONG-TERM INVESTMENTS (Notes 2 and 5)
32,869,391
PROPERTY, PLANT AND EQUIPMENT
(Notes 2, 6 and 12)
Cost
Buildings
Machinery and equipment
Office equipment
Total cost
Accumulated depreciation
Advance payments and construction in progress
Net Property, Plant and Equipment
GOODWILL (Note 2)
OTHER ASSETS
Deferred income tax assets (Notes 2 and 11)
Deferred charges - net (Notes 2 and 7)
Refundable deposits (Note 14)
Assets leased to others (Note 2)
Miscellaneous
Total Other Assets
52,527,184
242,347,119
4,754,183
299,628,486
(140,224,640)
56,095,396
215,499,242
2,961,317
16,175,070
3,239,723
772,912
555,053
9,250
20,752,008
-
-
6
-
(1)
2
1
1
19
10
16
72
1
89
(42)
17
64
1
5
1
-
-
-
6
994,815
125,175
30,335,314
(946,734)
-
-
9
-
(2,204,167)
(1)
10,967,935
8,122,000
2,891,808
85,950,586
33,422,010
46,307,643
210,461,923
3,672,927
260,442,493
3
2
1
25
10
14
62
1
77
(94,332,168)
(28)
40,895,045
207,005,370
12
61
3,309,707
6,559,293
3,122,610
967,985
625,647
9,250
11,284,785
1
2
1
-
-
-
3
TOTAL ASSETS
$335,734,684
100
$340,972,458
100
The accompanying notes are an integral part of the financial statements.
50
T S M C A n n u a l R e p o r t 2 0 0 1
LIABILITIES AND SHAREHOLDERS' EQUITY
Amount
%
Amount
%
2001
2000
CURRENT LIABILITIES
Payable to related parties (Note 12)
Accounts payable
Payable to contractors and equipment suppliers
Accrued expenses and other current liabilities
(Note 15)
Lease obligation
Current portion of bonds (Note 8)
Total Current Liabilities
NONCURRENT LIABILITIES
Bonds - net of current portion (Note 8)
Guarantee deposits (Note 14)
Accrued pension cost (Notes 2 and 10)
Deferred gain on sale-leaseback (Note 2)
Total Noncurrent Liabilities
Total Liabilities
SHAREHOLDERS' EQUITY (Notes 2 and 9)
Capital stock - $10 par value`
Authorized: 24,600,000 thousand shares in 2001
and 17,800,000 thousand shares in 2000
Issued:
$2,082,606
1,123,894
12,367,319
4,636,800
-
5,000,000
25,210,619
24,000,000
7,210,972
1,854,853
268,165
33,333,990
58,544,609
Preferred - 1,300,000 thousand shares
13,000,000
Common - 16,832,554 thousand shares
in 2001 and 11,689,365 thousand shares in 2000
168,325,531
Capital surplus
Retained earnings:
Appropriated as legal reserve
Appropriated as special reserve
Unappropriated earnings
Cumulative translation adjustments
Unrealized loss on long-term investment
57,128,433
17,180,067
349,941
19,977,402
1,228,701
-
1
-
4
1
-
1
7
7
2
1
-
10
17
4
50
17
5
-
6
1
-
$4,346,578
7,989,953
24,392,400
4,409,731
50,000
-
1
3
7
1
-
-
41,188,662
12
29,000,000
7,086,379
1,509,535
434,183
38,030,097
79,218,759
8
2
1
-
11
23
13,000,000
4
116,893,646
34
55,285,821
16
10,689,323
1,091,003
65,143,847
(278,377)
(71,564)
3
1
19
-
-
Total Shareholders' Equity
277,190,075
83
261,753,699
77
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$335,734,684
100
$340,972,458
100
T S M C A n n u a l R e p o r t 2 0 0 1
51
English Translation of Financial Statements Originally Issued in Chinese
STATEMENTS OF INCOME
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars, Except Earnings Per Share)
2001
2000
Amount
%
Amount
%
GROSS SALES (Notes 2, 12 and 16)
SALES RETURNS AND ALLOWANCES (Note 2)
NET SALES
COST OF SALES (Note 12)
GROSS PROFIT
OPERATING EXPENSES (Note 12)
Research and development
General and administrative
Marketing
Total Operating Expenses
INCOME FROM OPERATIONS
NON-OPERATING INCOME
Interest
Insurance compensation
Premium income (Notes 2 and 15)
Technical service income (Note 12)
Gain on sales of property, plant and equipment (Note 2)
Gain on sales of short-term investments (Note 2)
Foreign exchange gain - net (Note 2)
Equity in net income of investee companies - net (Notes 2 and 5)
Other (Note 12)
Total Non-Operating Income
NON-OPERATING EXPENSES
Equity in net loss of investee companies - net (Notes 2 and 5)
Interest (Notes 6 and 15)
Foreign exchange loss - net (Notes 2 and 15)
Loss on sales of and provision for loss on property,
plant and equipment (Note 2)
Loss on sale of long-term investments (Note 2)
Amortization of bond issue cost (Note 2)
Other
Total Non-Operating Expenses
INCOME BEFORE INCOME TAX
INCOME TAX BENEFIT (Notes 2 and 11)
NET INCOME
EARNINGS PER SHARE
$128,563,819
(2,675,816)
125,888,003
89,506,952
36,381,051
10,649,019
6,048,665
2,341,081
19,038,765
17,342,286
1,365,919
860,835
234,732
55,077
52,376
-
-
-
322,618
2,891,557
6,429,631
1,951,830
695,620
234,862
102,978
12,504
147,703
9,575,128
10,658,715
3,824,459
100
71
29
8
5
2
15
14
1
1
-
-
-
-
-
-
-
2
5
2
-
-
-
-
-
7
9
3
$14,483,174
12
Based on weighted-average number of
common shares outstanding - 16,832,554 thousand shares
in 2001 and 11,400,882 thousand shares in 2000
$0.83
Based on 16,417,270 thousand shares
The accompanying notes are an integral part of the financial statements.
100
54
46
5
3
2
10
36
1
1
-
-
-
-
1
-
-
3
-
1
-
-
-
-
-
1
38
1
39
$169,223,128
(2,994,708)
166,228,420
90,231,581
75,996,839
7,203,591
5,299,135
2,953,008
15,455,734
60,541,105
1,575,460
1,623,832
8,115
23,557
62,921
104,643
828,025
779,326
295,295
5,301,174
-
1,858,197
-
99,220
-
32,658
14,610
2,004,685
63,837,594
1,268,600
$65,106,194
$5.71
$3.96
52
T S M C A n n u a l R e p o r t 2 0 0 1
English Translation of Financial Statements Originally Issued in Chinese
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
CAPITAL STOCK ISSUED
CAPITAL SURPLUS (Note 2)
RETAINED EARNINGS (Note 9)
LOSS ON 0000CUMULATIVE
UNREALIZED
Preferred Stock
Common Stock
Additional
From
Excess on
Shares
Shares
From
(Thousand)
Amount
(Thousand)
Amount
Consolidation
Paid-In
Capital
Long-term
Foreign Bond
Investment
Investment
Properties
Donation
Total
Gain on
Sale of
Legal
Reserve
Special
Reserve
Unappropriated
INVESTMENT 00ADJUSTMENTS
SHAREHOLDERS
Earnings
Total
(NOTE 2) 000000(NOTE 2)
EQUITY
LONG-TERM000TRANSLATION
TOTAL
$-
7,670,882
$76,708,817
$-
$-
$472,300
$11,289,998
$69,058
$55
$11,831,411
$8,258,359
$-
$25,062,256
$33,320,615
$- 000($1,091,003)
$120,769,840
BALANCE,
JANUARY 1, 2000
Appropriations of
prior year's earnings
Legal reserve
Special reserve
Bonus to employees - stock
Stock dividends - 25.55%
Bonus to directors
and supervisors
Capital Transferred from
capital surplus - 2.45%
Issuance of shares
on June 8, 2000
Issuance of shares for
the merge on June 30, 2000
-
-
-
-
-
-
-
-
-
Issuance of preferred stocks 1,300,000
on November 29, 2000
13,000,000
-
-
-
-
-
-
-
-
-
-
-
-
172,121
1,721,208
1,959,910
19,599,103
-
-
187,937
1,879,366
115,000
1,150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
23,172,550
1,583,515
15,835,152
22,329,129
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,502
(231,583)
-
-
-
-
-
-
-
(1,879,366)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,178
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,879,366)
23,172,550
22,329,129
-
-
58,178
5,502
(231,583)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
467,443
4,674,426
-
-
4,675,746
46,757,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,803,168
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,803,168
39,282
162
-
-
2,430,964
-
(2,430,964)
1,091,003
(1,091,003)
-
-
- 0000000000000-
- 0000000000000-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,721,208)
(1,721,208)
- 0000000000000-
(19,599,103)
(19,599,103)
- 0000000000000-
(215,151)
(215,151)
- 0000000000000-
(215,151)
-
-
-
-
- 0000000000000-
-
- 0000000000000-
24,322,550
(135,077)
(135,077)
- 0000000000000-
38,029,204
-
-
- 0000000000000-
13,000,000
65,106,194
65,106,194
- 0000000000000-
65,106,194
(58,178)
(58,178)
- 0000000000000-
(5,502)
(5,502)
- 0000000000000-
231,583
231,583
- 0000000000000-
-
-
-
-
-
-
-
(71,564) 0000000000000-
(71,564)
- 0000000812,626
812,626
(4,674,426)
(4,674,426)
- 0000000000000-
(41,137)
(41,137)
- 0000000000000-
(41,137)
(46,757,459)
(46,757,459)
- 0000000000000-
-
(584,303)
(584,303)
- 0000000000000-
(584,303)
14,483,174
14,483,174
- 0000000000000-
14,483,174
(1,803,168)
(1,803,168)
- 0000000000000-
(39,282)
(39,282)
- 0000000000000-
(162)
(162)
- 0000000000000-
-
-
-
-
-
-
-
71,564 0000000000000-
71,564
-0000001,507,078
1,507,078
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,490,744
-
(6,490,744)
(741,062)
741,062
-
-
- 0000000000000-
- 0000000000000-
1,300,000
13,000,000
11,689,365
116,893,646
22,329,129
23,172,550
246,219
9,410,632
127,236
55
55,285,821
10,689,323
1,091,003
65,143,847
76,924,173
(71,564) 000000(278,377)
261,753,699
Net income in 2000
Gain on sales of property,
plant and equipment
Gain on sales of property,
plant and equipment
from investees
Adjustment arising from
changes in shareholders'
equity of investees
Unrealized loss on l-
ong-term investment
from investees
Translation adjustments
BALANCE,
DECEMBER 31, 2000
Appropriations of
prior year's earnings
Legal reserve
Special reserve
Bonus to employees - stock
Cash dividends paid
for preferred stocks
Stock dividends - 40%
Bonus to directors
and supervisors
Net income in 2001
Reclassification of the
accumulated deficits from
the merged company
Gain on sales of property,
plant and equipment
Gain on sales of property,
plant and equipment
from investees
Reversal of the unrealized loss
on long-term investments
Translation adjustments
BALANCE,
DECEMBER 31, 2001
1,300,000
$13,000,000
16,832,554
$168,325,531
$24,132,297
$23,172,550
$246,381
$9,410,632
$166,518
$55
$57,128,433
$17,180,067
$349,941
$19,977,402
$37,507,410
$-00000$1,228,701
$277,190,075
The accompanying notes are an integral part of the financial statements.
T S M C A n n u a l R e p o r t 2 0 0 1
53
English Translation of Financial Statements Originally Issued in Chinese
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Net income of the merged companies
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Deferred income taxes
Equity in net loss (income) of investee companies - net
Loss on sales of long-term investments - net
Loss on sales of and provision for loss on property, plant and equipment - net
Accrued pension cost
Allowance for doubtful receivables
Allowance for sales returns and others
Changes in operation assets and liabilities:
Decrease (increase) in:
Receivable from related parties
Notes receivable
Accounts receivable
Inventories - net
Prepaid expenses and other current assets
Forward exchange contract receivable
Increase (decrease) in:
Payable to related parties
Accounts payable
Forward exchange contract payable
Accrued expenses and other current liabilities
2001
2000
$14,483,174
$65,106,194
-
(135,077)
48,875,754
33,051,197
(3,840,777)
(1,059,841)
6,429,631
(779,326)
102,978
182,486
345,318
153,758
377,384
-
13,823
360,673
490,835
965,503
470,954
(51,407)
(538,201)
96,364
10,377,678
(14,268,429)
2,463,517
(2,985,133)
359,342
49,480
729,775
7,108
(2,263,972)
(6,866,059)
218,165
(201,096)
3,552,646
2,379,105
76,168
736,885
Net Cash Provided by Operating Activities
71,666,308
87,800,269
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in short-term investments
Acquisitions of:
Property, plant and equipment
Long-term investments
Proceeds from sales of:
Property, plant and equipment
Long-term investments
(Forward)
-
236,250
(68,002,448)
(79,270,461)
(4,563,682)
(11,866,583)
298,231
162,334
219,233
-
54
T S M C A n n u a l R e p o r t 2 0 0 1
Increase in deferred charges
Decrease (increase) in refundable deposits
Cash inflow from the merged companies
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term bonds
Capital stock
Payments on:
Short-term bank loans
Commercial paper
Lease obligation
Long-term bank loans
Increase in guarantee deposits
Bonus paid to directors and supervisors
Cash dividends paid on preferred shares
Net Cash Provided by (Used in) Financing Activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
2001
2000
($1,465,703)
($1,089,730)
195,073
-
(770,733)
1,412,404
(73,376,195)
(91,129,620)
-
-
-
-
9,000,000
37,322,550
(12,635,000)
(5,479,288)
(50,000)
-
-
(7,550,000)
124,593
(584,303)
(41,137)
1,900,663
(215,151)
-
(550,847)
22,343,774
(2,260,734)
19,014,423
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR
35,664,440
16,650,017
CASH AND CASH EQUIVALENTS, END OF THE YEAR
$33,403,706
$35,664,440
SUPPLEMENTAL INFORMATION
Interest paid (excluding the amounts of $207,297 and
$72,903 capitalized in 2001 and 2000, respectively)
Income tax paid
Noncash investing and financing activities:
Effect of exchange rate changes on cash and cash equivalents
Current portion of long-term liabilities
Cash paid for acquisitions of property, plant and equipment:
$1,980,399
$2,366,026
$16,318
$-
$1,258,395
$1,009,264
$5,000,000
$50,000
Total acquisitions
$55,977,367
$89,963,658
Decrease (increase) in payables to contractors and equipment suppliers
12,025,081
(10,693,197)
$68,002,448
$79,270,461
The accompanying notes are an integral part of the financial statements.
T S M C A n n u a l R e p o r t 2 0 0 1
55
English Translation of Financial Statements Originally Issued in Chinese
NOTES TO FINANCIAL STATEMENTS
(Amounts in Thousand New Taiwan Dollars, Unless Specified Otherwise)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Ltd (the "Company"), a Republic of China corporation, is engaged
mainly in the manufacture, sale, packaging, and testing of integrated circuits and other semiconductor devices, and
the manufacture and design of masks. TSMC was incorporated as a venture among the Government of the Republic
of China, acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its
affiliates (Philips); and certain other private investors. In September 1994, its shares were listed on the Taiwan Stock
Exchange. In October 1997, TSMC listed its shares of stock on the New York Stock Exchange in the form of American
Depositary Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The financial statements have been prepared in conformity with accounting principles generally accepted in the
Republic of China. The significant accounting principles adopted by the Company are as follows:
Cash and cash equivalents
Government bonds acquired under agreements that provide for their repurchase within less than three months from
date of purchase are classified as cash equivalents.
Allowance for doubtful receivables
Allowance for doubtful receivables are provided based on a review of the collectibility of individual receivables.
Sales and allowance for sales returns and others
Sales are recognized when titles of products and risks of ownerships are transferred to customers, primarily upon
shipment. Allowance and related provisions for sales returns and others are provided based on experience; such
provisions are deducted from sales and related costs are deducted from cost of sales.
Inventories
Inventories are stated at the lower of standard cost (adjusted to approximate weighted-average cost) or market
value. Market value represents net realizable value for finished goods and work in process, and replacement value for
raw materials, supplies and spare parts.
Long-term investments
Investments in shares of stock of companies wherein the Company exercises significant influence on their operating
and financial policy decisions are accounted for using the equity method. The difference between the investment cost
and the Company's proportionate equity in the net assets of the investee on the date of acquisition is amortized over
five years using the straight-line method. Such amortization and the Company's proportionate share in the net
income or net loss of investee companies are recognized as components of "Equity in net income or net loss in
investee companies - net" account. When the Company subscribes to additional investee shares at a percentage
different from its existing equity interest, the resulting carrying amount of the investment in equity investee differs
from the amount of Company's proportionate share in the investee's net equity. The Company records such difference
as an adjustment to "Capital surplus" and the "Long-term investments" accounts, respectively.
In the event an investee offsets its capital surplus, excluding reserve from asset revaluation, against its accumulated
deficit, which is recorded as a debit to the "Capital surplus" account and a credit to "Retained earnings" account, the
56
T S M C A n n u a l R e p o r t 2 0 0 1
Company also records the entry by its proportionate share of the investee capital surplus that was generated
subsequent to its acquisition of investee interest, excluding reserve from asset revaluation.
If an investee's functional currency is a foreign currency, "Cumulative translation adjustments" would result from the
process of translating the investees' financial statements into the functional currency of the Company.
Other stock investments are accounted using the cost method. These investments are stated at cost less declines in
market value of listed stocks or declines in value of unlisted stocks which is considered irrecoverable; such reductions
are charged to shareholders' equity or current income, respectively. Cash dividends are recognized as income in the
year received but are accounted for as reduction in the carrying value of the long-term investment if the dividends
are received in the same year that the related investments are acquired.
Stock dividends are recognized only as an increase in the number of stocks held on the ex-dividend date.
Investments in foreign mutual funds are stated at the lower of cost or net asset value (NAV). Write-downs of cost and
write-ups to original acquisition cost resulting from subsequent recovery of the NAV are debited or credited to
shareholders' equity.
The costs of investments sold are determined using the weighted-average method.
The Company's proportionate share in the gains from sales of property, plant and equipment, net of the applicable
income tax, included as its share in the net income or net loss of equity-accounted investee companies for the current
year is reclassified to capital surplus from retained earnings. Such amount is reclassified back to retained earnings
when the Company subsequently disposes the related investment. Also, if an investee company has unrealized loss on
its own long-term investment which is evaluated using the lower-of-cost-or-market method, the Company recognizes
that unrealized loss in proportion to the Company's equity interest and is recorded in an account that is a component
of its own shareholders' equity.
Gain or loss on transactions with investee companies wherein the Company owned at least 20% of the outstanding
common stock but less than a controlling interest are deferred in proportion to the ownership percentage until
realized through a transaction with a third party. The entire amount of the gains or losses on sales to majority-owned
subsidiaries are deferred until such gains or losses are realized through the subsequent sale of the related products to
third parties. On the other hand, if the gains or losses arose from sales by the investee companies or majority-owned
subsidiaries to the Company, such gains or losses are deferred in proportion to the ownership percentage until
realized through transactions with third parties.
Property, plant and equipment and assets leased to others
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Major
additions, renewals, betterment, and interest expenses incurred during the construction period are capitalized.
Maintenance and repairs are expensed currently.
P r o p e r t y, plant and equipment covered by agreements qualifying as capital leases are carried at the lower of the
present value of all minimum future rental payments, or the market value of the property at the inception date of the
lease. The lessee's periodic rental payment includes the purchase price of the leased property, and the interest
expense.
Depreciation is computed using the straight-line method over these estimated service lives: Buildings - 10 to 20 years;
machinery and equipment - 5 to 10 years; and office equipment - 3 to 5 years.
T S M C A n n u a l R e p o r t 2 0 0 1
57
Upon sale or disposal of an item of property, plant and equipment, the related cost and accumulated depreciation
are removed from the accounts, and any gain or loss is credited or charged to income. Any such gain, less applicable
income tax, is reclassified to capital surplus at the end of the year (before the relevant regulation was amended).
Goodwill
Goodwill arising from the business combinations is amortized using the straight-line method over 10 years.
Deferred charges
These consist of software and system design costs, technology know-how, bond issue costs and technology license
fee. These are amortized as follows: software and system design costs - three years, technology know-how - five
years, bond issue costs - the term of the bonds, and technology license fee - the term of the contract or economic
useful lives of the related technology.
Pension costs
Net periodic pension costs are recorded on the basis of actuarial calculations. Unrecognized net transition obligation
is amortized over 25 years.
Deferred gain on sale-leaseback
The gain on the sale of property is deferred. Such deferred gain is then amortized as follows: (a) operating lease -
adjustment of rental expenses over leasing period, and (b) capital lease - adjustment of depreciation over the
estimated useful life or leasing period.
Income tax
The Company adopted inter-period income tax allocation method. Deferred income taxes are recognized for the tax
effects of taxable temporary differences, unused tax credits, and operating loss carry forwards. Valuation allowance is
provided for deferred income tax assets that are not certain to be realized. A deferred tax asset or liability is,
according to the classification of its related asset or liability, classified as current or non-current. However, if a
deferred asset or liability cannot be related to an asset or liability in the financial statements, it is classified as current
or non-current based on the expected reversal date of temporary difference.
Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.
Income taxes (10%) on unappropriated earnings generated starting January 1, 1998 are recorded as expense in the
year when the shareholders have resolved that the earnings shall be retained.
Derivative financial instruments
Foreign currency forward exchange contracts (forward contracts), entered into for purpose other than trading are
recorded as follows: the differences in the New Taiwan dollar amounts translated using the spot rates and the
amounts translated using the contracted forward rates are amortized over the terms of the forward contracts using
the straight-line method. At the balance sheet dates, the receivables or payables arising from forward contracts are
restated using the prevailing spot rates and the resulting differences are recognized in income. Also, the receivables
and payables related to the forward contract are netted out and the resulting net amount is presented as either an
asset or liability.
The Company enters into interest rate swap transactions to manage interest rate fluctuations on liabilities. These
transactions are accounted for on an accrual basis, in which cash settlement receivable or payable is recorded as an
adjustment to interest income or expenses.
58
T S M C A n n u a l R e p o r t 2 0 0 1
The notional amounts of the foreign currency option contracts entered into for hedging purposes are not recognized
as either assets or liabilities on the contract dates.
Other foreign-currency transactions
Other foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the
transactions occur. Gains or losses caused by the application of different foreign exchange rates when cash in foreign
currency is converted into New Taiwan dollars, or when foreign-currency receivables and payables are settled,
credited or charged to income in the year of conversion or settlement. At period-end, the balances of foreign-
currency assets and liabilities are restated based on prevailing exchange rates and any resulting gains or losses are
credited or charged to income.
Reclassifications
Certain accounts in 2000 have been reclassified to conform to 2001 classifications.
3. CASH AND CASH EQUIVALENTS
Cash and bank deposits
Government bonds acquired under repurchase agreements
4. INVENTORIES - NET
Finished goods
Work in process
Raw materials
Supplies and spare parts
Less - allowance for losses
2001
$31,678,047
1,725,659
$33,403,706
2000
$35,053,733
610,707
$35,664,440
2001
$1,618,635
6,685,094
521,680
870,780
9,696,189
(1,191,771)
$8,504,418
2000
$1,606,368
8,422,401
423,444
1,083,348
11,535,561
(567,626)
$10,967,935
T S M C A n n u a l R e p o r t 2 0 0 1
59
5. LONG-TERM INVESTMENTS
Shares of stock
Equity method:
TSMC International Investment
Vanguard International Semiconductor
TSMC Partners
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
TSMC - North America
Emerging Alliance Fund
Kung Cherng Investment
Cherng Huei Investment
Po Cherng Investment
Chi Hsin Investment
Hsin Ruey Investment
Chi Cherng Investment
TSMC - Japan
TSMC - Europe
Cost method:
Traded
Amkor Technology
Taiwan Mask Corp.
Non-traded
United Technology
Hon Tung Venture Capital
Shin-Etsu Handotai Taiwan Company Ltd.
W.K. Technology Fund IV
Taiwan Semiconductor Technology
Funds
Horizon Ventures
Crimson Asia Capital
2001
2000
% of
% of
Carrying
Owner-
Carrying
Owner-
Value
ship
Value
ship
$19,987,814
3,377,526
3,032,376
2,907,967
786,062
741,617
177,812
166,639
164,724
158,252
157,352
156,694
80,156
10,147
100
25
100
32
100
99
25
25
25
25
25
25
100
100
$23,678,522
5,615,075
535,162
935,870
666,924
-
158,752
138,200
136,984
139,000
128,100
130,794
37,803
9,594
31,905,138
32,310,780
280,748
32,129
193,584
150,000
105,000
50,000
-
811,461
125,701
27,091
152,792
-
2
11
10
7
2
-
-
-
-
32,129
146,250
120,000
105,000
50,000
500,000
953,379
93,304
64,547
157,851
$32,869,391
$33,422,010
100
25
100
32
100
-
25
25
25
25
25
25
100
100
-
2
10
10
7
4
19
-
-
60
T S M C A n n u a l R e p o r t 2 0 0 1
The equity in net income or (net loss) of subsidiaries and investee companies consisted of the following:
TSMC International Investment
Vanguard International Semiconductor
TSMC Partners
SSMC
TASMC
Others
2001
($4,855,844)
(2,236,940)
2,357,405
(1,722,080)
-
27,828
($6,429,631)
2000
$138,589
597,812
494,966
(473,661)
(331,330)
352,950
$779,326
The carrying values of equity-accounted investments and the related equity in net income or net loss were based on
audited of financial statements in the same periods.
Information on the long-term investments is as follows:
Market value of traded stocks
Equity in the net assets of unlisted stocks
Net asset value of funds
2001
$7,055,888
29,124,386
152,792
2000
$8,729,639
27,597,593
157,851
6. PROPERTY, PLANT AND EQUIPMENT
Accumulated depreciation consisted of the following:
Buildings
Machinery and equipment
Office equipment
2001
$15,181,445
122,659,129
2,384,066
2000
$9,816,698
82,775,965
1,739,505
$140,224,640
$94,332,168
Information on the status of the construction of the Company's manufacturing facilities as of December 31, 2001 is
as follows:
Manufacturing Plant
Fab 6
Fab 7
Fab 8
Fab 12 - 1st stage
Fab 14 - 1st stage
Estimated
Cost
Accumulated
Expenditures
Expected or Actual
Date of Start of Operations
$76,889,000
$69,986,000
5,930,500
28,322,100
38,280,800
9,711,000
2,867,500
11,355,300
28,988,700
8,449,600
March 2000
March 2001
March 2001
April 2002
June 2003
T S M C A n n u a l R e p o r t 2 0 0 1
61
Interest expense (before deducting capitalized amounts $207,297 in 2001 and $72,903 in 2000) for the years ended
December 31, 2001 and 2000 were $2,159,127 and $1,931,100, respectively. The interest rates used for purposes of
calculating the capitalized amount were 5.283% in 2001 and 6.468% to 6.620% in 2000.
As of December 31, 2001, properties with an aggregate net book value of about $1,378,184 were mortgaged as
collateral for long-term loans.
7. DEFERRED CHARGES - NET
Software and system design costs
Technology license fee
Technology know-how
Bond issue costs
Others
8. BONDS
Domestic unsecured bonds:
2001
$2,073,752
996,578
103,500
33,091
32,802
2000
$1,420,528
1,442,292
157,500
45,595
56,695
$3,239,723
$3,122,610
2001
2000
Repayable in March 2003, 7.71% annual interest payable semi-annually
$4,000,000
$4,000,000
Repayable in October 2002 and 2004, 5.67% and 5.95%
annual interest payable annually, respectively
10,000,000
10,000,000
Repayable in December 2005 and 2007, 5.25% and 5.36%
annual interest payable annually, respectively
15,000,000
$29,000,000
15,000,000
$29,000,000
Future minimum principal payments under the Company's bonds arrangements as of December 31, 2001 are as
follows:
Year of Repay
2002
2003
2004
2005
2006 and thereafter
Less - current portion
Amount
$5,000,000
4,000,000
5,000,000
10,500,000
4,500,000
29,000,000
(5,000,000)
$24,000,000
On November 6, 2001, the board of directors approved the issuance of domestic unsecured bonds with an aggregate
principal amount of $15,000,000. The issuance of the domestic unsecured bond has been approved by the Securities
and Futures Commission of ROC (SFC). As of January 18, 2002, the issuance is still in process.
62
T S M C A n n u a l R e p o r t 2 0 0 1
9. SHAREHOLDERS' EQUITY
The Company has issued 259,006 thousand American Depositary Shares (ADS) as of December 31, 2001. The number
of common shares represented by the ADSs is 1,295,031 thousand shares.
The SFC has, on January 4, 2002, approved the Company's sponsorship of the offer by certain existing shareholders of
up to 350,000 thousand common shares in the form of ADSs. The decision to sponsor the offering of common shares
in the form of ADSs was approved by the Board of Directors on December 3, 2001. The offering is still in process as of
January 18, 2002.
Capital surplus except for that arising from the application of the equity method of accounting, pursuant to ROC
Company Law, can only be used to offset a deficit or transferred to capital (as a stock dividend). Such transfer from
capital surplus to capital can only be made once a year at a specific percentage. An amendment to the ROC Company
Law issued on November 14, 2001, limited the nature of the capital surplus that can be used to offset a deficit or
transferred to capital (as a stock dividend) to those that arise from donations (donated capital) and those attributable
to the excess of the issue price over the par value of capital stock issued.
The Company's Articles of Incorporation provide that the following shall be appropriated from annual net income
(less any deficit):
a. 10% legal reserve;
b. Special reserve in accordance with relevant laws or regulations;
c. Bonuses to directors and supervisors and to employees equal to 1% and at least 1% of the remainder, respectively;
d. Dividends to holders of preferred shares equal to a 3.5% annual rate, based on the period during which the
preferred shares have been outstanding;
e. The appropriation of the remaining balance after the above shall be decided at the shareholder's meeting;
These appropriations of net income shall be resolved by the shareholders in the following year and given effect in the
financial statements of that year.
Dividends are distributed in cash and/or in the form of shares of stock. Since the Company is in a capital-intensive
industry, distribution of profits shall be made preferably by way of stock dividend. The total of cash dividend paid (in
any given year) should not exceed 50% of total dividends paid and/or distributed.
The aforementioned appropriation for legal reserve shall be made until the reserve equals the aggregate par value of
the Company's outstanding capital stock. The reserve can only be used to offset a deficit; or, when its balance has
reached 50% of the aggregate par value of the outstanding capital stock of the Company, up to 50% thereof can be
distributed as stock dividend.
Pursuant to existing regulations promulgated by the Securities and Futures Commission, a special reserve equivalent
to the debit balance of any account shown in the shareholder equity section of the balance sheets, other than the
deficit, shall be made from unappropriated retained earnings. The special reserve shall be adjusted accordingly based
on the debit balance of such accounts as at year-end. As of December 31, 2001, prior year's accumulated deficit in
the amount of $1,803,168 from WSMC is included in the unappropriated retained earnings.
T S M C A n n u a l R e p o r t 2 0 0 1
63
Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident shareholders are
allowed a tax credit for the income tax paid by the Company on earnings generated starting January 1, 1998. An
Imputation Credit Account (ICA) is maintained by the Company for such income tax and the tax credit allocated to
each shareholder. The maximum credit available for allocation to each shareholder cannot exceed the balance shown
in the ICA on the date of distribution of dividends.
The Company issued 1,300,000 thousand unlisted Series A - preferred shares to certain investors. The foregoing
preferred shares will be redeemed within thirty months from their issuance. The terms and conditions in respect to
the issuance of the preferred shares provides that, until the shares are redeemed, their holders:
a. Are entitled to receive cumulative cash dividends at an annual rate of 3.5%.
b. Are not entitled to receive any stock dividends (whether declared out of unappropriated earnings or capital
surplus).
c. Have priority over the holders of common shares to the assets of the Company available for distribution to
shareholders upon liquidation or dissolution of the Company. However, the preemptive rights to the assets shall
not exceed the issue value of the shares.
d Have voting rights similar to that of the holders of common shares.
e. Have no right to convert their shares into common shares.
10. PENSION PLAN
The Company has a pension plan for all regular employees, which provides benefits based on length of service and
average monthly salary for the final six months of employment.
The Company contributes at an amount equal to 2% of salaries every month to a Pension Fund (the "Fund"). The
Fund is administered by a pension fund monitoring committee (the "Committee") and deposited in the Committee's
name in the Central Trust of China.
The changes in the fund and accrued pension cost are summarized as follows:
a. Components of pension cost
Service cost
Interest cost
Projected return on plan assets
Amortization
b. Reconciliation of the fund status of the plan and accrued pension cost
Benefit obligation
Vested benefit obligation
Nonvested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
2001
2000
$417,967
95,920
(43,968)
8,300
$478,219
$739
1,024,525
1,025,264
1,407,014
2,432,278
$376,689
91,234
(26,675)
8,300
$449,548
$-
763,879
763,879
1,550,009
2,313,888
(Forward)
64
T S M C A n n u a l R e p o r t 2 0 0 1
Fair value of plan assets
Funded status
Unrecognized prior service cost
Unrecognized net transitional obligation
Unrecognized net gain
Additional liability
Accrued pension cost
c. Actuarial assumptions
Discount rated used in determining present values
Future salary increase rate
Expected rate of return plan on assets
d. Contributions to pension fund
e. Funds transferred from TASMC and WSMC
f. Payments from pension fund
11. INCOME TAX BENEFIT
(835,583)
1,596,695
-
(157,691)
415,849
-
(661,099)
1,652,789
-
(165,991)
22,737
-
$1,854,853
$1,509,535
5.0%
5.0%
5.0%
$131,894
$-
$-
6.0%
6.0%
6.0%
$95,932
$173,339
$1,458
a. A reconciliation of income tax expense - current before tax credits and income tax expense on income before
income tax at statutory rate is shown below:
Income tax expense base on "income before income tax" at statutory rate
($2,664,679)
($12,760,503)
Tax-exempt income
Temporary difference
Income tax expense - current before tax credit
1,089,000
(993,679)
7,770,000
(49,497)
($2,569,358)
($5,040,000)
2001
2000
The statutory rate for 2001 and 2000 were 25% and 20%, respectively.
b. Income tax benefits consist of:
Income tax expense - current before tax credits
Additional 10% on the unappropriated earnings
Income tax credits
Other income tax
Income tax for the current year
Net change in deferred income tax assets (liabilities) for the period
Investment tax credits
Temporary differences
Valuation allowance
Adjustment of prior years' taxes
2001
2000
($2,569,358)
($5,040,000)
(319,000)
2,888,358
(16,318)
(16,318)
(88,024)
5,128,024
-
-
144,925
(1,874,945)
3,146,369
(388,671)
5,570,797
(1,678,791)
-
189,693
$3,824,459
$1,268,600
T S M C A n n u a l R e p o r t 2 0 0 1
65
c. Deferred income tax assets and liabilities consisted of:
Current:
Investment tax credits
Less - valuation allowance
Noncurrent:
Investment tax credits
Temporary differences
Less - valuation allowance
2001
2000
$2,347,000
-
$2,347,000
$8,422,000
(300,000)
$8,122,000
$21,710,461
$15,490,536
(2,493,755)
19,216,706
(3,041,636)
$16,175,070
(618,810)
14,871,726
(8,312,433)
$6,559,293
The effective tax rates for deferred income tax as of December 31, 2001 and 2000 were 17.56% and 7.54%,
respectively.
d. Integrated income tax information:
The balances of the imputation credit account (ICA) as of December 31, 2001 and 2000 were $9,365 and $5,888,
respectively.
The tax credit ratio computed as of December 31, 2001 was 0.02% while the tax credit on earnings as of
December 31, 2000 on dividend distributed in 2001 was 0.01%.
The imputation credit allocated to each shareholder shall be based on the balance in the ICA on the date of
distribution of dividends; thus the expected creditable ratio for 2001 may be adjusted according to the difference
between the expected and actual imputation credit allowed under the regulation.
e. The unappropriated retained earnings as of December 31, 2001 and 2000 included the earnings generated up to
December 31, 1997 of $4,827.
f. Unused investment tax credits arising from purchase of machinery and equipment, and research and development
expenditures as of December 31, 2001 will expire as follows:
Year of Expiry
2002
2003
2004
2005
g. The income from the following projects and services is exempt from income tax:
Expansion of first and second manufacturing plants-modules A and B, third manufacturing
plant and fourth manufacturing plant, and construction of fifth manufacturing plant
Expansion of the seventh manufacturing plant
66
T S M C A n n u a l R e p o r t 2 0 0 1
Amount
$4,487,894
5,500,778
10,720,895
3,347,894
$24,057,461
Tax-Exemption Period
1999 to 2002
1998 to 2001
h. The tax authorities have examined income tax returns of TSMC through 1999, excluding 1998. However, TSMC is
contesting the assessment of the tax authority for 1992, 1993, 1996 and 1997.
12. RELATED PARTY TRANSACTIONS
The Company engages in business transactions with the following related parties:
a. Industrial Technology Research Institute (ITRI); the Chairman of the Company is one of the director of ITRI
b. Philips Electronics N.V. (Philips); a major shareholder
c. Subsidiaries
TSMC International Investment (TSMC-BVI)
TSMC - North America
TSMC - Europe
TSMC - Japan
d. Investees
Vanguard International Semiconductor Corporation (VIS)
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
e. TSMC Technology, a subsidiary of TSMC-BVI
f. WAFERTECH, LLC, an indirect subsidiary of TSMC-BVI
The transactions with the aforementioned parties, in addition to those disclosed in other notes, are summarized as
follows:
For the year
Sales
Philips and its affiliates
VIS
ITRI
SSMC
WAFERTECH, LLC
Purchase
WAFERTECH, LLC
VIS
SSMC
Rental expense - ITRI
Manufacturing expenses
2001
2000
Amount
%
Amount
%
$2,389,257
1,177,094
114,546
48,972
3,111
$3,732,980
$6,797,817
3,801,975
42,984
$10,642,776
2
1
-
-
-
3
37
22
-
59
$5,289,927
17,012
198,146
-
30,816
$5,535,901
$13,296,633
6,572,110
-
$19,868,743
3
-
-
-
-
3
37
19
-
56
$161,604
11
$161,575
14
Technical assistance fee - Philips
$2,418,276
100
$2,137,175
86
(Forward)
T S M C A n n u a l R e p o r t 2 0 0 1
67
Marketing expenses
Commission
TSMC - North America
$1,028,725
42
$994,686
34
TSMC - Japan
TSMC - Europe
Service Charge
TSMC - North America
Sales of property, plant and equipment
194,696
124,384
118,648
8
5
5
165,087
143,461
118,852
$1,466,453
60
$1,422,086
VIS
WAFERTECH, LLC
Non-operating income
SSMC
WAFERTECH, LLC
VIS
Others
At end of the year
Receivables
VIS
Philips and its affiliates
ITRI
WAFERTECH, LLC
SSMC
TSMC Technology
Prepaid expense and other current asset
Advance rent - ITRI
Payables
WAFERTECH, LLC
VIS
Philips and its affiliates
TSMC - North America
TSMC - Europe
TSMC - Japan
TSMC Technology
SSMC
5
5
4
48
37
-
37
3
-
-
-
3
16
65
6
2
9
2
$268,871
24,645
$293,516
$95,284
4,612
467
-
$100,363
$320,179
116,499
37,383
25,251
20,671
3,878
79
7
86
3
-
-
-
3
61
22
7
5
4
1
$87,189
-
$87,189
$152,347
1,749
5,604
38
$159,738
$159,890
643,604
56,078
20,361
89,154
25,728
$523,861
100
$994,815
100
$42,664
2
$42,664
6
$817,616
548,472
499,331
136,443
54,601
15,355
10,318
470
39
26
24
7
3
1
-
-
$1,487,181
1,808,964
797,375
166,063
66,343
16,165
4,487
-
34
42
18
4
2
-
-
-
$2,082,606
100
$4,346,578 100
Sales to related parties are based on normal selling prices and collection terms, except for disposal of properties
and technical service, which were in accordance with the related contracts.
The amount payable to WAFERTECH, LLC represents the costs of finished goods purchased by TSMC. The costs of
finished goods purchased were calculated in accordance with the related contractual agreements.
68
T S M C A n n u a l R e p o r t 2 0 0 1
13. SIGNIFICANT LONG-TERM OPERATING LEASES
The Company leases from ITRI the land, building and certain machinery and equipment of its first manufacturing
facility under agreements that will expire in March 2002. The annual rent under such agreement amounts to
$161,604.
The Company leases the land where its 2nd through 14th manufacturing facilities are located from the Science-Based
Industrial Park Administration. The related agreements will expire on various dates from March 2008 to December
2020 and have annual rentals aggregating $208,716. The agreements can be renewable upon their expiration.
Future annual minimum rentals under the aforementioned leases are as follows:
Year
2002
2003
2004
2005
2006
2007 and thereafter
Amount
$249,117
208,716
208,716
208,716
208,716
1,789,500
$2,873,481
14.
SIGNIFICANT COMMITMENTS AND CONTINGENCY AS OF DECEMBER 31, 2001
The Company's commitments and contingency as of December 31, 2001 are as follows:
a. Under a Technical Cooperation Agreement with Philips, as amended on May 12, 1997, the Company shall pay
technical assistance fee at a percentage of net sales, as defined in the agreement, of certain products. The
agreement shall remain in force up to July 9, 2007 and thereafter be automatically renewed for successive periods
of three years. Under the amended agreement, the fee is subject to deduction by the amounts the Company pays
to any third party for settling any licensing/infringement issue after the first five-year period of the amended
agreement, provided that the fee after reduction will not be below a certain percentage of the net selling price.
b. Subject to certain equity ownership and notification requirements, Philips and its affiliates can avail themselves
each year up to 30% of the Company's production capacity.
c. Under a technical cooperation agreement with ITRI, the Company shall reserve and allocate up to 35% of certain
of its production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the
MOEA.
d. Under several foundry agreements, the Company shall allocate a portion of its production output for sale to
certain major customers from whom guarantee deposits of US$205,949 thousand had been received as of
December 31, 2001.
e. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. dated March 30, 1999,
the parties agreed to: (a) form a joint venture company to be named Systems on Silicon Manufacturing Company
Pte Ltd. (SSMC) for the purpose of constructing an integrated circuit foundry in Singapore, (b) set SSMC's total
T S M C A n n u a l R e p o r t 2 0 0 1
69
authorized capital at about S$1.2 billion, and, (c) allow the Company to invest in 32% of SSMC's capital. As of
December 31, 2001, the aggregate amount of investments from these parties has not reached S$1.2 billion. The
Company and Philips committed to buy a specific percentage of the production capacity of SSMC. If any party
defaults on the agreement and the capacity utilization of SSMC falls below a specific percentage of its total
capacity, the defaulting party should compensate SSMC for all related unavoidable costs.
f. Provision of technical services to SSMC under a Technical Cooperation Agreement (the "Agreement") entered into
on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net
selling prices of specific products sold by SSMC. The Agreement remains in force for ten years and is automatically
renewed for successive periods of five years unless pre-terminated by either party under certain conditions.
g. The Company provides a guarantee for loans of US$268,000 thousand, US$40,000 thousand and US$440,000
thousand obtained by TSMC Development, Inc., TSMC- North America and WAFERTECH, LLC, respectively.
h. Under a Technical Transfer Agreement with National Semiconductor Corporation ("National") entered into on June
27, 2000, TSMC shall receive payments for the technology transferred to National. The agreement will remain in
force for ten years. After expiration, this agreement will be automatically renewed for successive periods of two
years unless pre-terminated by either party under certain conditions.
i. The Company entered into a Manufacturing Agreement with Vanguard International Semiconductor Corp. ("VIS").
VIS agrees to reserve certain capacity to manufacture for the Company certain devices on logic or other
technologies required by the Company's customers, at a discount to the selling prices as agreed by the parties. The
Company paid $1,200,000 thousand to VIS as Security Bond. VIS shall return portions of the Bond without any
interest to the Company upon the purchase of wafers by the Company. The contract will remain in force for five
years.
j. Under a patent license agreement, the Company has entered into a cross license arrangement for certain
semiconductor patents with a US-based company for a term starting from October 26, 2001 through December
31, 2006. TSMC shall pay royalty fees to the such company.
k. Unused letter of credits as of December 31, 2001 were $1,200 thousand.
l. As of December 31, 2001, unused credit lines for short-term loans were NT$6,430,000 thousand and US$300,000
thousand.
m. As of December 31, 2001, unused credit lines for long-term loans were NT$3,000,000 thousand and US$37,750
thousand.
15.
ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFC for TSMC and investees:
a. Financing provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held: Please see Table 3 attached;
70
T S M C A n n u a l R e p o r t 2 0 0 1
d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in
capital: Please see Table 4 attached;
e. Acquisition of individual real estates at costs of at least NT$100 million or 20% of the paid-in capital: Please see
Table 5 attached;
f. Disposal of individual real estates at prices of at least NT$100 million or 20% of the paid-in capital: None;
g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Please see Table 6 attached;
h. Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see
Table 7 attached;
i. Names, locations, and related information of investees on which the Company exercises significant influence:
Please see Table 8 attached;
j. Financial instrument transactions:
1) Derivative financial instruments
The relevant information on the derivative financial instruments entered into by the Company is as follows:
a) Open forward exchange contracts as of December 31, 2001
Currency
Contract Amount
(Thousand)
Fair Value
(Thousand)
Settlement Date
Maturity
(Thousand)
Sell
Sell
US$
US$
US$17,912
NT$618,206
Jan. 2002
NT$620,600
US$783,000
NT$26,985,688
Jan. 2001~Mar.2002
NT$27,013,402
Payables from forward exchange contracts (shown in the balance sheet as part of "Other current liabilities"
account) as of December 31, 2001 aggregated to $397,117. Net exchange loss for the year ended December
31, 2001 was $1,872,979.
The net assets or liabilities that have been hedged by the above forward exchange contracts are as follows:
Accounts receivable
Accounts payable
Time deposits
b) Interest rate swaps
Amount (Thousand)
US$518,984
US$169,664
US$707,416
The Company has entered into interest rate swap contracts to hedge exposure to rising interest rates on its
floating rate long-term loans. These significant transactions are summarized as follows:
Contract Date
April 28, 1998
April 29, 1998
June 26, 1998
June 26, 1998
Period
Amount (Thousand)
May 21, 1998 to May 21, 2003
May 21, 1998 to May 21, 2003
June 26, 1998 to June 26, 2003
July 6, 1998 to July 6, 2003
$2,000,000
1,000,000
1,000,000
1,000,000
Interest expenses on these transactions for the year ended December 31, 2001 were $473,413.
T S M C A n n u a l R e p o r t 2 0 0 1
71
c) Option contracts
The Company has entered into foreign currency option contracts to hedge risks of exchange rate fluctuations
arising from its anticipated U.S. dollar cash receipts from its export sales or Japanese Yen obligations related to
its importation of machinery and equipment.
Outstanding option contracts as of December 31, 2001 were as follows:
Contract
Currency
Contract Amount
(Thousand)
Carrying
Value
Fair Value
(Thousand)
Strike Price
Maturity
Put option sell
EUR
EUR 293,000
($39,500)
($252,833)
0.8940 ~ 0.9340(EUR/US$)
Jan. ~ Feb., 2002
For the year ended December 31, 2001, the Company realized premium income of $328,254 and premium
expense of $93,522.
d) Transaction risk
i) Credit risk. The banks, which are the counter-parties to the foregoing derivative financial instruments, are
reputable financial institutions. Management believes its exposures related to the potential default by those
counter parties are low.
ii) Market price risk. All derivative financial instruments are intended as hedges for fluctuations in currency
exchange rates on the Company foreign currency denominated receivables or payables and interest rate
fluctuations on its floating rate long-term loans. Gains or losses from forward exchange contracts are likely to
be offset by gains or losses from receivables and payables. Interest rate risks are also controlled as the expected
cost of capital is fixed. Thus, market price risks from exchange rate and interest rate fluctuations are minimal.
iii) Liquidity and cash flow requirements. The cash flow requirements on the derivative instruments are limited
to the net differences between the spot rates and contracted forward rates at settlement dates (for forward
contracts); and amounts payable arising from the differences in the rates (for interest rate swap contracts).
Also, options may not have to be exercised at all in cases where the strike price is higher than the related
market price at exercise dates. Management believes that the foregoing requirements are not material.
2) Fair value of financial instruments
Non-derivative financial instruments
Assets
Cash and cash equivalents
Receivable from related parties
Notes and Accounts receivable
Long-term investments
Pledged deposits
Refundable deposits
Liabilities
Payable to related parties
Accounts payable
(Forward)
72
T S M C A n n u a l R e p o r t 2 0 0 1
2001
2000
Carrying Amount
Fair Value
Carrying Amount
Fair Value
$33,403,706
$33,403,706
$35,664,440
$35,664,440
523,861
523,861
994,815
994,815
20,134,218
20,134,218
30,460,489
30,460,489
32,869,391
36,333,066
33,422,010
36,485,083
25,356
772,912
25,356
772,912
46,856
46,856
967,985
967,985
2,082,606
2,082,606
4,346,578
4,346,578
1,123,894
1,123,894
7,989,953
7,989,953
Payables to contractors and equipment suppliers
12,367,319
12,367,319
24,392,400
24,392,400
Bonds
Guarantee deposits
29,000,000
29,703,063
29,000,000
29,035,803
7,210,972
7,210,972
7,086,379
7,086,379
Derivative financial instruments
Forward exchange contracts (buy)
Forward exchange contracts (sell)
Interest rate swaps
Option
-
-
1,984,740
1,978,998
28,031,119
27,603,894
20,802,311
20,788,804
26,969
(343,088)
1,601
234,017
(39,500)
(252,833)
-
(456,068)
Fair values of financial instruments were determined as follows:
a) Short-term financial instruments -- carrying values.
b) Long-term investments -- market value for listed companies and net equity value for the others.
c) Refundable deposits and guarantees deposits -- carrying values.
d) Long-term bank loans -- based on forecasted cash flows discounted at interest rates of similar long-term
liabilities. Bonds payable is discounted at present value. Fair values of other long-term liabilities are also their
carrying values as they use floating interest rates.
e) Derivative financial instruments -- based on the quotations from banks.
The fair values of non-financial instruments were not included in the fair values disclosed above. Accordingly, the
sum of the fair values of the financial instruments listed above does not equal the fair value of the Company.
16. SEGMENT FINANCIAL INFORMATION
a. Export sales
Area
America
Asia
Europe
2001
2000
$63,896,732
23,874,375
7,523,873
$81,686,803
42,906,968
11,360,517
$95,294,980
$135,954,288
The export sales information is presented by billed regions.
b. The Company only has one customer that accounts for at least 10% of its total sales. The sales to such customer
amounted to $21,789,769 in 2001 representing 17% of its total sales. The sales, however, to such customer
amounted to only $10,307,244 in 2000 representing only 6% of total sales.
T S M C A n n u a l R e p o r t 2 0 0 1
73
TABLE 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
FINANCING PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No.
Financing
Name
Counter-Party
Financial
Statement
Account
Financing
Limit for
Each
Borrowing
Company
Maximum Balance
for the Period
(US$ in Thousand)
Ending Balance
(US$ in Thousand)
Interest
Rate
Financing
Reasons
Allowance
for Bad Debt
Collateral
Item Value
Transaction
Amount
Financing
Company's
Financing
Amount Limits
(US$ in Thousand)
1
2
TSMC-BVI
TSMC
Technology
Other
receivables
-
US$14,662
US$14,662
7.75%
VIS
VIS Holding
Prepaid
expenses
(Note 2)
$1,232
$-
-
Operating
capital
Prepayments
for product
development
$-
-
- $-
- -
$-
-
US$779,968
(Note 1)
$4,400,000
(Note 3)
Note 1: Not exceeding the issued capital of the Company.
Note 2: Not exceeding 10% of the issued capital of VIS for each transaction entity, and also limited to 30% of the issued capital of each transaction entity.
Note 3: Not exceeding 20% of the issued capital of VIS.
TABLE 2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
ENDORSEMENT/GUARANTEE PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No.
Endorsement/
Guarantee
Provider
Counter-Party
Name
Limits on Each
Counter-party's
Endorsement/
Guarantee Amounts
Maximum
Balance for
the Period
(US$ in Thousand)
Ending Balance
(US$ in Thousand)
Nature of
Relationship
(Note 2)
Value of
Collateral Property,
Plant and
Equipment (Note 3)
Ratio of
Accumulated Amount
of Collateral to Net
Equity of the Latest
Financial Statement
Maximum
Collateral/Guarantee
Amounts Allowable
(Note 1)
0
TSMC
TSMC Development Inc.
TSMC - North America
WAFERTECH, LLC
3
2
3
(Note 4)
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
Note 1: 30% of the issued capital of the Company.
Note 2: The No. 2 represents a subsidiary in which TSMC holds directly over 50% of the equity interest.
The No. 3 represents an investee in which TSMC holds directly and indirectly over 50% of the equity interest.
$54,397,659
$-
-
-
3.38%
0.51%
5.56%
Note 3:Promissory notes for collateral.
Note 4:Not exceeding 10% of the issued capital of the Company, and also limiting to the issued capital of the transaction entity, unless otherwise approved by Board of directors.
74
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 3
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
MARKETABLE SECURITIES HELD
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: TSMC
Stock
TSMC - North America
TSMC - Europe
TSMC - Japan
VIS
TSMC-BVI
TSMC Partners
SSMC
Emerging Alliance Fund
Taiwan Mask Corp.
United Technology Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Hon Tung Ventures Capital
Amkor Technology
Certificate
Po Cherng Investment
Chi Hsin Investment
Kung Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Cherng Huei Investment
Equity
Crimson Asia Capital Fund
Horizon Ventures Fund
Held Company Name: Chi Cherng Investment
Stock
TSMC
(Forward)
Subsidiary
Subsidiary
Subsidiary
Investee
Subsidiary
Subsidiary
Investee
Subsidiary
-
-
-
-
-
-
Investee
Investee
Investee
Investee
Investee
Investee
-
-
Long-term investment
11,000
$786,062
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
-
6
556,133
779,968
300
301
-
7,782
16,783
10,500
5,000
15,000
505
-
-
-
-
-
-
-
-
10,147
80,156
3,377,526
19,987,814
3,032,376
2,907,967
741,617
32,129
193,584
105,000
50,000
150,000
280,748
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
100
100
100
25
100
100
32
99
2
11
7
2
10
-
25
25
25
25
25
25
N/A
N/A
$786,062
10,147
80,156
6,584,620
19,987,814
3,032,376
2,907,967
741,617
183,658
274,107
118,726
64,855
139,086
287,610
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
Major shareholder
Short-term investment
3,023
98,282
-
253,173
T S M C A n n u a l R e p o r t 2 0 0 1
75
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: Chi Cherng Investment
Certificate
Po Cherng Investment
Chi Hsin Investment
Hsin Ruey Investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Kung Cherng Investment
6,000
6,000
6,000
6,000
6,000
$98,834
94,951
94,411
106,687
99,983
Major shareholder
Short-term investment
6,758
226,819
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
99,983
Major shareholder
Short-term investment
4,240
187,508
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Po Cherng Investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
94,951
94,017
94,411
106,687
99,983
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Cherng Huei Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Stock
TSMC
Certificate
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Major shareholder
Short-term investment
4,917
198,896
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
106,687
15
15
15
15
15
-
15
15
15
15
15
-
15
15
15
15
15
-
15
15
15
15
15
$98,834
94,951
94,411
106,687
99,983
565,937
98,834
94,951
94,017
94,411
99,983
355,058
Pledge 150
thousand shares
94,951
94,017
94,411
106,687
99,983
411,724
Pledge 1,600
thousand shares
98,834
94,951
94,017
94,411
106,687
Kung Cherng Investment
Major shareholder
Long-term investment
Held Company Name: Chi Hsin Investment
Stock
TSMC
(Forward)
76
T S M C A n n u a l R e p o r t 2 0 0 1
Major shareholder
Short-term investment
3,561
138,747
-
298,220
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: Chi Hsin Investment
Certificate
Po Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Hsin Ruey Investment
6,000
6,000
6,000
6,000
6,000
$98,834
94,017
94,411
106,687
99,983
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Major shareholder
Short-term investment
1,407
98,996
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
106,687
99,983
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
15
15
15
15
15
-
15
15
15
15
15
97
97
$98,834
94,017
94,411
106,687
99,983
117,836
98,834
94,951
94,017
106,687
99,983
US$65,203
US$45,766
Held Company Name: TSMC-BVI
Stock
InveStar Semiconductor
Development Fund Inc.
InveStar Semiconductor
Development Fund (II) Inc.
TSMC Development Inc.
TSMC Technology Inc.
3DFX Interactive Inc.
Held Company Name: VIS
Bond fund
Qiung Ban
Yuan Da Duo Li #2
THE TP ROC
Stock
Subsidiary of
TSMC-BVI
Subsidiary of
TSMC-BVI
Subsidiary of
TSMC-BVI and its
chairman is also
TSMC's chairman
Subsidiary of
TSMC-BVI and its
chairman is also
TSMC's chairman
-
-
-
-
VIS Associates Inc.
Subsidiary
Long-term investment
PowerChip Semiconductor Inc.
Etron Technology Inc.
Walsin Technology Inc.
Investee
Investee
Investee
Long-term investment
Long-term investment
Long-term investment
(Forward)
Long-term investment
45,000
US$65,203
Long-term investment
45,000
US$45,766
Long-term investment
Long-term investment
1
1
US$201,231
100
US$201,231
US$1,591
100
US$1,591
Long-term investment
68
US$297
Short-term investment
Short-term investment
Short-term investment
28,409
26,278
25,923
41,070
202,185
5,617
34,551
40,000
350,000
350,000
902,999
2,651,216
275,766
414,481
-
-
-
-
100
9
3
10
US$30
401,960
352,465
355,763
902,999
3,263,269
281,864
358,864
T S M C A n n u a l R e p o r t 2 0 0 1
77
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: VIS
MEGIC Corporation
Form Factor, Inc.
United Technology Co., Ltd.
Held Company Name: VIS Associates Inc.
Stock
VIS Investment Holding, Inc.
Equity
Silicon Valley Equity Fund
Silicon Valley Equity Fund II
ABN AMRO Bank Equity Certificate
Fund
Grand Palace Trust
Investee
Investee
Investee
Long-term investment
Long-term investment
Long-term investment
16,500
267
3,357
$177,000
64,360
38,716
9
1
2
$188,581
64,360
54,872
Subsidiary of
VIS Associates Inc.
Long-term investment
68
US$891
100
US$891
-
-
-
-
Long-term investment
Long-term investment
-
-
US$7,894
US$5,705
Short-term investment
23,168
US$10,047
35
14
-
US$7,894
US$5,705
US$11,319
Long-term investment
-
US$2,800
100
US$2,800
Held Company Name: VIS Investment Holding, Inc.
Stock
VIS Micro, Inc.
Held Company Name: TSMC Development
Stock
WAFERTECH, LLC
Held Company Name: TSMC Partners
ADR
TSMC
Investee
Long-term investment
200
US$258
100
US$258
Long-term investment
-
US$226,541
99
US$226,541
Investee of TSMC
Development and its
chairman is also
chairman of TSMC
Parent Company
Short-term investment
495
US$7,357
Held Company Name: InveStar Semiconductor Development Fund Inc.
Stock
Silicon Image, Inc.
Marvell Technology Group Ltd.
Silicon Labo Ratories
Chang Yi Technology
Divio
Capella Microsystems, Inc.
Equator Technologies, Inc.
Empower Tel Networks, Inc.
Ubicom, Inc.
Global Test Corp.
Chip Strate
Ritch Tech
APE Fu Ding Technology
(Forward)
-
-
-
-
-
-
-
-
-
-
-
-
-
78
T S M C A n n u a l R e p o r t 2 0 0 1
Short-term investment
Short-term investment
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
297
3,413
15
1,668
30
542
133
317
861
Long-term investment
13,268
Long-term investment
Long-term investment
Long-term investment
6,660
1,023
2,750
US$520
US$3,350
US$472
US$1,643
US$3
US$135
US$90
US$344
US$172
US$5,672
US$2,142
US$326
US$1,518
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$8,726
US$1,236
US$123,797
US$519
US$672
US$3
US$135
US$90
US$344
US$172
US$10,126
US$2,073
US$1,743
US$1,336
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: InveStar Semiconductor Development Fund Inc.
Preferred stock
Integrated Memory Logic, Inc.
Divio (Next wave)
SiRF Technology Inc.
Rise
Capella Microsystems, Inc.
Sensory, Inc.
Equator Technologies, Inc.
Light Speed Semiconductor Corporation
Empower Tel Networks, Inc.
Ubicom, Inc.
RapidStream
Tropian, Inc.
Sonics, Inc.
Pico Turbo, Inc.
Atheros, Inc.
NanoAmp Solutions, Inc.
Formfactor, Inc.
Monolithic Power Systems, Inc.
Memsic, Inc.
Reflectivity, Inc.
Signia
Match Lab, Inc.
HINT Corporation
Creosys, Inc.
Incentia Design Systems, Inc.
Bond
Rise
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
1,831
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
667
306
600
1,383
1,404
443
2,252
3,840
1,056
2,056
1,758
3,082
1,050
1,607
541
267
2,521
2,727
1,064
3,000
1,875
1,000
1,500
286
US$1,809
US$500
US$1,333
US$1,500
US$1,298
US$1,250
US$1,338
US$3,064
US$5,128
US$1,361
US$1,050
US$2,334
US$3,082
US$1,250
US$3,593
US$853
US$2,000
US$2,000
US$1,500
US$2,000
US$1,500
US$1,500
US$1,000
US$1,500
US$500
Long-term investment
-
US$300
Held Company Name: InveStar Semiconductor Development Fund (II) Inc.
Stock
HPL Aquisition Corporation
Richtek Technology Corporation
Chang Yi Technology
Preferred stock
Procoat Technology
Omega Band, Inc.
Memsic, Inc.
OEpic, Inc.
Equator Technologies, Inc.
NanoAmp Solutions, Inc.
RapidStream, Inc.
Signia Technologies, Inc.
(Forward)
-
-
-
-
-
-
-
-
-
-
-
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
187
480
487
2,500
1,389
2,289
2,696
770
250
246
500
US$1,124
US$1,001
US$1,139
US$869
US$1,250
US$1,560
US$2,500
US$1,501
US$1,000
US$1,057
US$750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$3,055
US$2,233
US$1,858
US$1,500
US$1,660
US$857
US$864
US$764
US$14,296
US$2,433
US$7,286
US$2,388
US$3,082
US$1,300
US$9,025
US$1,900
US$3,600
US$4,938
US$2,894
US$2,000
US$3,900
US$1,500
US$1,000
US$1,500
US$500
US$300
US$2,669
US$987
US$139
US$857
US$1,250
US$2,489
US$3,023
US$1,501
US$1,000
US$1,057
US$750
T S M C A n n u a l R e p o r t 2 0 0 1
79
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: InveStar Semiconductor Development Fund (II) Inc.
Advanced Analogic Technology, Inc.
Y-MEDIA Corporation
Monlithic Power Systems, Inc.
Ralink Technology, Inc.
Sonics, Inc.
Newport Opticom, Inc.
Silicon Data, Inc.
Capella Microsystems, Inc.
Angstron Systems, Inc.
Tropain, Inc.
SIRF Technology, Inc.
Match Lab, Inc.
OEpic, Inc.
Bond
Omega Band, Inc.
Pico Turbo, Inc.
Held Company Name: Emerging Alliance Fund
Stock
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
948
281
674
1,833
3,082
1,157
500
800
1,567
1,464
20
313
-
N/A
N/A
US$1,261
US$1,500
US$1,515
US$1,500
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
Global Investment Holding Inc.
Investee
Long-term investment
10,000
$100,000
Preferred stock
Quake Technologies, Inc.
Pixim, Inc.
Newport Opticom, Inc.
NetLogic Microsystems, Inc.
Quickilver Technology, Inc.
Ikanos Communication, Inc.
Litchfield Communications
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
467
833
962
602
3,320
1,741
3,799
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
1
3
6
1
29
3
6
US$1,261
US$1,500
US$1,515
US$1,767
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
$100,000
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
80
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-
IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Counter-
Party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance
Shares
(Thousand)
Amount
Shares
(Thousand)
Amount
(US$ in
Thousand)
Shares
(Thousand)
Amount
Carrying
Value
Gain (Loss)
on Disposal
Shares
(Thousand)
Amount (US$ in
Thousand)
(Note 1)
Subsidiary
-
$-
-
$837,045
Emerging
Alliance
Fund
Long-term
investment
SSMC
Investee
90
935,870
211
3,553,862
-
-
$-
-
$-
-
$-
-
-
$741,617
301
2,907,967
-
-
-
-
-
-
-
-
-
-
50,000
500,000
-
-
50,000
395,748
(Note2)
500,000
(104,252)
-
-
-
-
-
-
-
-
505
280,748
10,000
100,000
-
-
-
-
-
-
-
-
505
280,748
10,000
100,000
-
US$4,000
- US$1,000
US$4,000
(US$3,000)
-
-
23,750
464,077
17,500
597,783
-
-
-
-
41,070
902,999
-
-
-
-
-
-
-
-
-
-
35,548
500,000
7,139
100,263
100,000
263
28,409
400,000
40,874
550,000
14,951
201,482
200,000
1,482
25,923
350,000
49,017
650,000
22,739
302,698
300,000
2,698
26,278
350,000
2,048
300,000
2,048
302,386
300,000
2,386
31,397
450,000
31,397
452,789
450,000
2,789
-
-
-
-
T S M C A n n u a l R e p o r t 2 0 0 1
81
Marketable
Securities
Type and
Name
Financial
Statement
Account
Company Name: TSMC
Stock
Emerging
Alliance Fund
Long-term
investment
Systems on
Silicon
Manufacturing
Company
(SSMC)
Taiwan
Semiconductor
Technology
Long-term
investment
Amkor
Technology
Amkor
Technology
Long-term
investment
Amkor
Technology
Company Name: Emerging Alliance Fund
Stock
Global
Investment
Holding, Inc.
Long-term
investment
Global
Ivestment
Holding,Inc.
Convertible Commercial Paper
VM Labs, Inc.
Long-term
investment
VM
Labs, Inc.
Company Name: VIS
Stock
VIS
Associates Inc.
Long-term
investment
Subsidiary
Bond Fund
Qiung Ban
THE TP ROC
Yuan Da
Duo Li #2
NITC
FUBON JU-I
(Forward)
Short-term
investment
Short-term
investment
Short-term
investment
Short-term
investment
Short-term
investment
-
-
-
-
-
Marketable
Securities
Type and
Name
Financial
Statement
Account
Counter-
Party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance
Shares
(Thousand)
Amount
Shares
(Thousand)
Amount
(US$ in
Thousand)
Shares
(Thousand)
Amount
Carrying
Value
Gain (Loss)
on Disposal
Shares
(Thousand)
Amount (US$ in
Thousand)
(Note 1)
Capital Save
Income
Home Run
Short-term
investment
Short-term
investment
-
-
Company Name: VIS Associates Inc.
ABN AMRO
Bank Equity
Certificates
Short-term
investment
-
-
-
-
-
-
-
-
-
-
15,295
200,000
15,295
201,139
200,000
1,139
51,811
650,000
51,811
656,159
650,000
6,159
-
-
-
-
223,168
US$10,047
-
-
-
-
23,168
US$10,047
Company Name: InveStar Semiconductor Development Fund. Inc.
Stocks
Centillium
Tec. Corp
Marvell
Technology
Group Ltd.
Short-term
investment
Short-term
investment
Preferred Stocks
Lara
Networks, Inc.
Short-term
investment
-
-
-
-
-
-
Company Name: InveStar Semiconductor Development Fund (II) Inc.
165
US$660
4,665
US$4,579
1,544
US$772
-
-
-
-
-
-
165 US$7,474
US$660
US$6,814
-
-
1,252 US$38,094
US$1,229
US$36,865
3,413
US$3,350
1,544 US$8,170
US$772
US$7,398
-
-
Sonic, Inc.
Long-term
investment
-
-
-
-
3,082
US$3,082
-
-
-
-
3,082
US$3,082
Note 1: The ending balance included the recognition of the investment income (loss) by the equity method and the accumulated translation adjustment.
Note 2: Disposal price included $115,000 in cash and the agreed exchange 505 thousand shares of Amkor Technology.
The market value for the shares of Amkor Technology on the disposal day worth $280,748.
TABLE 5
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Company Name
Property
Transaction
Date
Transaction
Amount
Payment Term Counter-Party
Nature of
Relationship
Prior Transaction of Related Counter-party
Price Reference
Owner
Relationship
Transfer Date Amount
Purpose of
Acquisition
Other Terms
-
-
N/A
N/A
N/A
N/A
Public bidding
N/A
N/A
N/A
N/A
Public bidding
Manufacturing
purpose
Manufacturing
purpose
None
None
TSMC
Fab 12
and office
Jan. 10, 2001
$345,000
Depend on the
progress of the
construction
China
Construction
Co, Ltd.
Fu Tsu .
Depend on the
progress of the Construction
construction
Co, Ltd
Jan. 29, 2001
476,200
82
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 6
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING
TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Related Party
Nature of Relationship
Transaction Details
Abnormal Transaction Note/Accounts Payable or Receivable
Note
Purchase/Sale Amount
% to Total*
Payment Terms
Unit Price
Payment Terms
Ending Balance
% to Total
Company Name: TSMC
Phillips and its
affiliates
VIS
ITRI
WAFERTECH, LLC
Major shareholder
Sales
$2,389,257
Investee
Sales
1,177,094
The company's chairman
is one of its directors
Indirect investee of the
subsidiary (TSMC-BVI)
Sales
114,546
Purchase
6,797,817
VIS
Investee
Purchase
3,801,975
2
1
-
37
22
Net 30 days
from invoice date
Net 45 days from
monthly closing date
Net 45 days from
monthly closing date
Net 30 days from
monthly closing date
Net 45 days from
monthly closing date
None
None
$116,499
None
None
320,179
None
None
37,383
None
None
(817,616)
None
None
(548,472)
22
61
7
39
26
*Percentage for sales is of gross sales and percentage for purchase is of the total purchases of material and finished goods.
TABLE 7
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Related Party
Nature of Relationship
Ending Balance
Turnover Rate
Overdue
Amounts Received
Allowance for
Amount
Action Taken
in Subsequent Period
Bad Debts
Company Name: TSMC
VIS
Investee
Phillips and its affiliates
Major shareholder
$320,179
116,499
N/A
$52,668
Accelerate demand on account receivables
58 days
20,820
Accelerate demand on account receivables
$92,345
80,559
-
-
T S M C A n n u a l R e p o r t 2 0 0 1
83
TABLE 8
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND INVESTEES
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Investee Company
Location
Investor Company: TSMC
Main Businesses
and Products
Original Investment Amount
Balance as of December 31, 2001
Dec. 31, 2001
Dec. 31, 2000
Shares
(Thousand)
Percentage of
Ownership
Carrying Value
Net Income (Loss)
of the Investee
Investment
Gain (Loss)
Note
TSMC - North America
San Jose,
California, U.S.A
Marketing and
engineering support
TSMC - Europe
Amsterdam,
The Netherlands
Marketing and
engineering support
TSMC - Japan
Yokohama, Japan
VIS
Hsin-Chu, Taiwan
Marketing and
engineering support
IC Design and
manufacturing
$333,718
$333,718
11,000
2,960
2,960
83,760
35,142
-
6
6,503,640
6,503,640
556,133
100
100
100
25
$786,062
$4,560
$4,560
Subsidiary
10,147
420
420
Subsidiary
80,156
(183)
(183)
Subsidiary
3,377,526
(8,692,423)
(2,236,940)
Investee
TSMC - BVI
Tortola,
British Virgin Islands
Investment
24,165,780
24,159,958
779,968
100
19,987,814
(4,855,844)
(4,855,844)
Subsidiary
Po Cherng Investment
Taipei, Taiwan
Investment
Chi Hsin Investment
Taipei, Taiwan
Investment
Kung Cherng Investment
Taipei, Taiwan
Investment
Chi Cherng Investment
Taipei, Taiwan
Investment
Hsin Ruey Investment
Taipei, Taiwan
Investment
Cherng Huei Investment
Taipei, Taiwan
Investment
TSMC Partners
Tortola,
British Virgin Islands
Investment
100,000
100,000
100,000
100,000
100,000
100,000
10,350
100,000
100,000
100,000
100,000
100,000
100,000
10,350
SSMC
Singapore
Manufacturing
the wafer
4,986,344
1,432,482
Emerging Alliance Fund
Cayman Islands
Investment
837,045
-
-
-
-
-
-
-
300
301
-
25
25
25
25
25
25
164,724
158,252
177,812
156,694
157,352
166,639
110,960
27,740
Investee
77,008
76,241
103,603
117,006
113,755
19,252
Investee
19,060
Investee
25,901
Investee
29,251
Investee
28,439
Investee
100
3,032,377
2,357,405
2,357,405
Subsidiary
32
99
2,907,967
(5,381,499)
(1,722,080)
Investee
741,617
(127,249)
(126,612)
Subsidiary
84
T S M C A n n u a l R e p o r t 2 0 0 1
10. Consolidated Financial Statements
English Translation of a Report Originally Issued in Chinese
Independent Auditors' Report
January 18, 2002
The Board of Directors and the Shareholders
Taiwan Semiconductor Manufacturing Company Ltd.
We have audited the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company
Ltd. and subsidiaries as of December 31, 2001, and 2000, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with Regulations for Auditing of Financial Statements by Certified Public
Accountants, and auditing standards generally accepted in the Republic of China. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Taiwan Semiconductor Manufacturing Company Ltd. and subsidiaries as of
December 31, 2001 and 2000, and the consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with the Guidelines for Securities Issuers' Financial Reporting and accounting
principles generally accepted in the Republic of China.
Notice to Readers
The accompanying financial statements are intended only to present the financial position, results of operations and
cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and
not those of another jurisdictions. The standards, procedures and practices to audit such financial statements are
those generally accepted and applied in the Republic of China.
T S M C A n n u a l R e p o r t 2 0 0 1
85
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(In Thousand New Taiwan Dollars, Except Par Value)
A S S E T S
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)
Short-term investments (Notes 2, 5 and 10)
Receivable from related parties (Note 16)
Notes receivable
Accounts receivable
Allowance for doubtful receivables (Note 2)
Allowance for sales returns and others (Note 2)
Inventories - net (Notes 2 and 6)
Deferred income tax assets (Notes 2 and 15)
Prepaid expenses and other current assets (Notes 16, 17 and 19)
Total Current Assets
2001
Amount
$37,556,295
1,398,071
494,732
176,582
19,957,636
(1,100,492)
(2,581,551)
9,828,328
2,350,147
2,721,421
70,801,169
LONG-TERM INVESTMENTS (Notes 2, 7 and 20)
11,599,150
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8, 16 and 11)
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Total cost
Accumulated depreciation
Advance payments and construction in progress
Net Property, Plant and Equipment
CONSOLIDATED DEBITS (Note 2)
OTHER ASSETS
Deferred income tax assets (Notes 2 and 15)
Deferred charges - net (Notes 2 and 9)
Refundable deposits (Note 18)
Assets leased to others (Note 2)
Miscellaneous
Total Other Assets
877,371
60,523,505
280,023,690
6,062,496
347,487,062
(155,948,960)
59,749,530
251,287,632
11,437,572
16,245,828
3,769,750
784,089
555,053
37,452
21,392,172
%
10
-
-
-
5
-
(1)
3
1
1
19
3
-
17
76
2
95
(42)
16
69
3
5
1
-
-
-
6
2000
Amount
$38,840,217
1,502,098
948,726
125,175
30,335,314
(946,734)
(2,458,323)
12,785,723
8,178,016
3,034,624
92,344,836
10,663,804
829,239
53,874,708
241,995,862
4,865,610
301,565,419
%
11
1
-
-
8
-
(1)
3
2
1
25
3
-
15
65
1
81
(103,884,879)
(28)
47,067,352
244,747,892
13
66
11,530,973
6,629,805
3,335,665
979,067
625,647
28,290
11,598,474
3
2
1
-
-
-
3
TOTAL ASSETS
$366,517,695
100
$370,885,979
100
The accompanying notes are an integral part of the consolidated financial statements.
86
T S M C A n n u a l R e p o r t 2 0 0 1
LIABILITIES AND SHAREHOLDERS' EQUITY
Amount
%
Amount
%
2001
2000
CURRENT LIABILITIES
Short-term bank loans (Note 10)
Payable to related parties (Note 16)
Accounts payable
Payable to contractors and equipment suppliers (Note 20)
Income tax payable (Notes 2 and 15)
Current portion of bonds (Note 12)
Accrued expenses and other current liabilities (Note 19)
Total Current Liabilities
LONG-TERM LIABILITIES
Long-term bank loans (Notes 11)
Bonds - net of current portion (Note 12)
Total Long-term Liabilities
OTHER LIABILITIES
Guarantee deposits (Note 18)
Accrued pension cost (Notes 2 and 14)
Deferred gain on sale-leaseback (Note 2)
Miscellaneous
Total Other Liabilities
MINORITY INTEREST IN SUBSIDIARIES (Note 2)
$6,269,181
1,048,273
1,397,879
12,867,236
81,483
5,000,000
6,665,000
33,329,052
22,399,360
24,000,000
46,399,360
7,212,688
1,856,617
268,165
141,498
9,478,968
120,240
2
-
-
4
-
1
2
9
6
7
13
2
-
-
-
2
-
$3,833,841
2,606,339
8,507,827
25,550,273
3,298
-
6,923,414
1
1
2
7
-
-
2
47,424,992
13
23,339,367
29,000,000
52,339,367
7,086,379
1,511,277
434,183
14,356
9,046,195
321,726
6
8
14
2
-
-
-
2
-
Total Liabilities
89,327,620
24
109,132,280
29
SHAREHOLDERS' EQUITY (Notes 2 and 13)
Capital stock - $10 par value
Authorized: 24,600,000 thousand shares in 2001
and 17,800,000 thousand shares in 2000
Issued: Preferred - 1,300,000 thousand shares
13,000,000
Common - 16,832,554 thousand shares in 2001 and
11,689,365 thousand shares in 2000
Capital surplus
Retained earnings:
Appropriated as legal reserve
Appropriated as special reserve
Unappropriated earnings
Cumulative translation adjustments
Unrealized loss on long-term investments
Total Shareholders' Equity
168,325,531
57,128,433
17,180,067
349,941
19,977,402
1,228,701
-
3
46
16
5
-
6
-
-
13,000,000
116,893,646
55,285,821
10,689,323
1,091,003
65,143,847
(278,377)
(71,564)
3
32
15
3
-
18
-
-
71
277,190,075
76
261,753,699
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$366,517,695
100
$370,885,979
100
T S M C A n n u a l R e p o r t 2 0 0 1
87
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars, Except Consolidated Earnings Per Share)
2001
2000
Amount
%
Amount
%
GROSS SALES (Notes 2, 16 and 20)
$128,560,708
$169,192,312
SALES RETURNS AND ALLOWANCES (Note 2)
(2,675,816)
(2,994,708)
NET SALES
125,884,892
100
166,197,604
100
COST OF SALES (Note 16)
GROSS PROFIT
OPERATING EXPENSES (Notes 16 and 20)
Research and development
General and administrative
Marketing
Total Operating Expenses
INCOME FROM OPERATIONS
NON-OPERATING INCOME (Note 20)
Gain on sales of short-term investments- net (Note 2)
Interest
Royalty income (Note 18)
Insurance compensation-net
Premium income-net (Notes 2 and 19)
Gain on sales of long-term investments - net
Technical service income (Notes 16 and 18)
Gain on sales of property, plant and equipment
Foreign exchange gain - net (Note 2)
Other
Total Non-Operating Income
NON-OPERATING EXPENSES (Note 20)
Equity in net losses of investee companies - net (Notes 2 and 7)
Interest (Notes 2, 8, and 19)
Foreign exchange loss - net (Notes 2 and 19)
Loss on sales of and provision for loss on property,
92,228,098
33,656,794
10,649,019
7,939,839
2,290,139
20,878,997
12,777,797
1,619,062
1,486,656
1,301,606
860,835
234,732
105,439
55,077
52,376
-
759,793
6,475,576
3,959,020
3,144,042
695,620
235,629
73
27
9
6
2
17
10
1
1
1
1
-
-
-
-
-
1
5
3
3
-
-
87,609,670
78,587,934
7,203,591
7,408,121
2,681,534
17,293,246
61,294,688
1,060,919
1,679,736
524,194
1,623,832
8,115
15,144
138,514
62,921
828,025
178,403
6,119,803
187,179
2,717,035
-
114,768
53
47
4
4
2
10
37
1
1
-
1
-
-
-
-
-
-
3
-
2
-
-
plant and equipment
(Forward)
88
T S M C A n n u a l R e p o r t 2 0 0 1
Amortization of issuance costs of bonds (Note 2)
Other
Total Non-Operating Expenses
$12,504
420,053
8,466,868
INCOME BEFORE INCOME TAX (Note 20)
10,786,505
INCOME TAX BENEFIT (Notes 2 and 15)
INCOME BEFORE MINORITY INTEREST
3,740,678
14,527,183
MINORITY INTEREST IN LOSS (INCOME) OF SUBSIDIARIES
(44,009)
-
-
6
9
3
12
-
$32,658
461,327
3,512,967
63,901,524
1,167,884
65,069,408
36,786
-
-
2
38
1
39
-
(Notes 2 and 20)
NET INCOME
CONSOLIDATED EARNINGS PER SHARE
Based on weighted-average number of
common shares outstanding - 16,832,554 thousand
shares in 2001 and 11,400,882 thousand shares in
2000
Based on 16,417,270 thousand shares
$14,483,174
12
$65,106,194
39
$0.83
$5.71
$3.96
The accompanying notes are an integral part of the consolidated financial statements.
T S M C A n n u a l R e p o r t 2 0 0 1
89
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
CAPITAL STOCK ISSUED
Preferred Stock
Common Stock
Shares
Shares
Subscribe
From
(Thousand)
Amount
(Thousand)
Amount
Capital
Consolidation
CAPITAL SURPLUS (Note 2)
Additional
From
Excess on
Paid-In
Capital
Long-term
Foreign Bond
Investment
Investment
Gain on
Disposal of
Properties
Donation
Total
Legal
Reserve
Special
Unappropriated
INVESTMENT
ADJUSTMENTS SHAREHOLDERS
Reserve
Earnings
Total
(NOTE 2)
(NOTE 2)
EQUITY
RETAINED EARNINGS (Note 13)
LONG-TERM TRANSLATION
TOTAL
UNREALIZED
LOSS ON
CUMULATIVE
$-
8,520,882
$85,208,817
$13,118,025
$12,120,000
$-
$472,300
$11,289,998
$69,058
$55
$23,951,411
$8,258,359
$-
$23,124,011
$31,382,370 000000000000$-
($1,090,106)
$152,570,517
-
-
-
-
172,121
1,721,208
1,959,910
19,599,103
-
-
187,937
1,879,366
-
-
-
-
-
-
-
-
-
-
-
-
300,000
3,000,000
(13,118,025)
12,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,502
(231,583)
-
-
-
-
-
-
-
(1,879,366)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58,178
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,879,366)
12,000,000
23,172,550
(1,790,871)
-
-
58,178
5,502
(231,583)
-
-
-
23,172,550
(1,790,871)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,430,964
-
(2,430,964)
- 0000000000000-
1,091,003
(1,091,003)
- 0000000000000-
1,803,168
1,803,168 0000000000000-
(897)
4,346,552
(1,721,208)
(1,721,208) 0000000000000-
(19,599,103)
(19,599,103) 0000000000000-
(215,151)
(215,151) 0000000000000-
-
-
-
- 0000000000000-
-00000000000000
- 0000000000000-
-
- 0000000000000-
65,106,194
65,106,194 0000000000000-
(58,178)
(58,178) 0000000000000-
(5,502)
(5,502) 0000000000000-
231,583
231,583 0000000000000-
- 0000000(71,564)
- 0000000000000-
812,626
812,626
1,300,000
13,000,000
11,689,365
116,893,646
22,329,129
23,172,550
246,219
9,410,632
127,236
55
55,285,821
10,689,323
1,091,003
65,143,847
76,924,173 0000000(71,564)
(278,377)
261,753,699
-
-
-
-
-
-
-
1,803,168
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,803,168
39,282
162
-
-
6,490,744
-
(6,490,744)
- 0000000000000-
(741,062)
741,062
- 0000000000000-
(4,674,426)
(4,674,426) 0000000000000-
(41,137)
(41,137) 0000000000000-
(46,757,459)
(46,757,459) 0000000000000-
(584,303)
(584,303) 0000000000000-
14,483,174
14,483,174 0000000000000-
(1,803,168)
(1,803,168) 0000000000000-
(39,282)
(39,282) 0000000000000-
(162)
(162) 0000000000000-
- 0000000071,564
- 0000000000000-
1,507,078
1,507,078
1,300,000
$13,000,000
16,832,554
$168,325,531
$-
$24,132,297
$23,172,550
$246,381
$9,410,632
$166,518
$55
$57,128,433
$17,180,067
$349,941
$19,977,402
$37,507,410 000000000000$-
$1,228,701
$277,190,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
BALANCE, JANUARY 1, 2000
Appropriations of
prior year's earnings
Legal reserve
Special reserve
Bonus to employees - stock
Stock dividends - 25.55%
Bonus to directors and
supervisors
Capital Transferred from
capital surplus - 2.45%
Issuance of shares
January 28, 2000
Issuance of shares
on June 8, 2000
Issuance of shares for
the merge on June 30,2000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of preferred stocks 1,300,000
on November 29, 2000
13,000,000
115,000
1,150,000
433,515
4,335,152
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
467,443
4,674,426
-
-
4,675,746
46,757,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net income in 2000
Gain on sales of property,
plant and equipment
Gain on sales of property,
plant and equipment
from Investees
Adjustment arising from
changes in shareholders'
equity of investees
Unrealized loss on long-
term investment
Translation adjustments
BALANCE,
DECEMBER 31, 2000
Appropriations of
prior year's earnings
Legal reserve
Special reserve
Bonus to employees - stock
Cash dividends paid for
preferred stock
Stock dividends - 40%
Bonus to directors
and supervisors
Net income in 2001
Reclassification of
the accumulated deficits
from the merged company
Gain on sales of property,
plant and equipment
Gain on sales of property,
plant and equipment
from investees
Reversal of the unrealized loss
on long-term investments
Translation adjustments
BALANCE,
DECEMBER 31, 2001
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The accompanying notes are an integral part of the consolidated financial statements
90
T S M C A n n u a l R e p o r t 2 0 0 1
-
-
-
-
-
-
-
-
-
-
-
(215,151)
-
1,881,975
24,322,550
-
-
-
-
-
-
13,000,000
65,106,194
-
-
-
(71,564)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(41,137)
-
(584,303)
14,483,174
-
-
-
71,564
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Deferred income taxes
Equity in net losses of investee companies - net
Gain on sales of long-term investments - net
Loss on sales of and provision for loss on property,
plant and equipment - net
Reversal of provision for losses on short-term
investment
Accrued pension cost
Allowance for doubtful receivables
Allowance for sales returns and others
Minority interest in income (loss) of subsidiaries
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivable from related parties
Notes receivable
Accounts receivable
Inventories - net
Prepaid expenses and other current assets
Forward exchange contract receivable
Increase (decrease) in:
Payable to related parties
Notes payable
Accounts payable
Income tax payable
Forward exchange contract payable
Accrued expenses and other current liabilities
Net Cash Provided by Operating Activities
(Forward)
2001
2000
$14,483,174
$65,106,194
55,323,040
(3,788,154)
3,959,020
(105,439)
183,253
(13,146)
345,340
153,758
123,228
44,009
453,994
(51,407)
10,377,678
2,957,395
202,303
49,480
(1,558,066)
-
(7,109,948)
78,185
218,165
(508,150)
75,817,712
41,446,137
(956,118)
187,179
(15,144)
51,847
-
370,276
524,532
1,679,309
(36,786)
(737,105)
38,959
(15,467,155)
(4,033,836)
351,988
(113,730)
2,334,247
(4,303)
3,174,958
(151,828)
(987,604)
2,024,180
94,786,197
T S M C A n n u a l R e p o r t 2 0 0 1
91
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in short-term investments
Decrease in pledged time deposits
Acquisitions of:
Property, plant and equipment
Long-term investments
Proceeds from sales of:
Property, plant, and equipment
Long-term investments
Increase in deferred charges
Decrease (increase) in refundable deposits
Decrease (increase) in other assets
Decrease in minority interest in subsidiaries
Increase in consolidated debit
Cash inflow from the merged companies
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of:
Short-term bank loans
Long-term bonds
Capital stock
Payments on:
Short-term bank loans
Commercial paper
Long-term bank loans
Increase in guarantee deposits
Decrease in lease obligation
Bonus paid to directors and supervisors and cash dividends
paid on preferred stocks
Increase in issuance cost of financing
Net Cash Provided by (Used in) Financing Activities
2001
2000
$117,173
-
($524,154)
3,161,693
(70,201,205)
(5,120,580)
(103,761,905)
(2,956,758)
301,416
559,137
(1,805,250)
194,978
(9,162)
(249,166)
(1,019,227)
-
364,875
49,376
(1,793,209)
(915,559)
77,451
(7,165,656)
(8,221,266)
736,594
(77,231,886)
(120,948,518)
2,435,340
-
-
-
-
(940,007)
126,309
(51,286)
(625,440)
(47,689)
897,227
-
9,000,000
39,204,525
(8,592,790)
(4,241,048)
(2,648,853)
2,978,984
(1,052)
(215,151)
(118,335)
35,366,280
NET INCREASE (DECREASE) CASH AND CASHEQUIVALENTS
(516,947)
9,203,959
EFFECT OF EXCHANGES IN FOREING EXCHANGE RATE
(766,975)
118,576
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR
38,840,217
29,517,682
CASH AND CASH EQUIVALENTS, END OF THE YEAR
$37,556,295
$38,840,217
SUPPLEMENTAL INFORMATION
Interest paid (excluding the amounts capitalized of NT$507,094 thousand
$3,468,112
$4,036,210
and NT$541,078 thousand in 2001 and 2000, respectively)
Income tax paid
Noncash investing and financing activities:
$20,767
$96,523
Effect of exchanges in foreign exchange rate on
$1,258,395
$1,009,264
cash and cash equivalents
(Forward)
92
T S M C A n n u a l R e p o r t 2 0 0 1
Current portion of long-term liabilities
Cash paid for acquisition of property, plant and equipment:
Total acquisitions
Decrease (increase) in payables to contractors
and equipment suppliers
2001
$5,001,116
2000
$51,055
$57,518,168
12,683,037
$113,996,068
(10,234,163)
$70,201,205
$103,761,905
SUPPLEMENTAL INFORMATION OF THE MERGERS:
TSMC had merged with Worldwide Semiconductor Manufacturing Corp. (WSMC) and had acquired TSMC- A c e r
Semiconductor Manufacturing Corp. (TASMC) by issuing new shares. The balance sheets as of June 30, 2000 of
WSMC and TASMC were as follows:
Cash
Inventories
Other current assets
Property, plant and equipment - net
Other assets
Current liabilities
Long-term liabilities
Other liabilities
Net assets acquired
Cancellation of stocks of the dissolved companies
Issuance of stocks from the surviving company
Capital surplus
TASMC
(Fair Value)
$736,594
1,647,845
2,308,391
19,846,708
7,335,526
(16,699,147)
(2,000,000)
(654,863)
12,521,054
(8,173,605)
(4,335,152)
$12,297
WSMC
(Book Value)
$675,810
1,805,243
3,150,257
40,512,706
5,101,000
(12,454,686)
(4,950,000)
(23,498)
33,816,832
-
(11,500,000)
$22,316,832
Total
$1,412,404
3,453,088
5,458,648
60,359,414
12,436,526
(29,153,833)
(6,950,000)
(678,361)
46,337,886
(8,173,605)
(15,835,152)
$22,329,129
The accompanying notes are an integral part of the consolidated financial statements.
T S M C A n n u a l R e p o r t 2 0 0 1
93
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousand New Taiwan Dollars, Unless Specified Otherwise)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China corporation, is engaged mainly
in the manufacture, sale, packaging, testing and design of integrated circuits and other semiconductor devices, and
the manufacture masks. TSMC was incorporated as a venture among the Government of the ROC, acting through the
Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain
other private investors. In September 1994, its shares were listed on the Taiwan Stock Exchange. In October 1997,
TSMC listed its shares of stock on the New York Stock Exchange in the form of American Depositary Shares.
TSMC has five direct wholly-owned subsidiaries, namely, TSMC-North America, Taiwan Semiconductor Manufacturing
Company Europe B.V (TSMC-Europe), TSMC-Japan, TSMC International Investment, TSMC Partners, a 99.5% owned
subsidiary, Emerging Alliance Fund and several 25% owned affiliates - Po Cherng Investment, Chi Hsin Investment,
Kung Cherng Investment, Chi Cherng Investment, Hsin Ruey Investment and Cherng Huei Investment. TSMC
International Investment has two wholly-owned subsidiaries - TSMC Development, Inc. and TSMC Technology Inc.,
and two 97%-owned subsidiaries - InveStar Semiconductor Development Fund, Inc. and InveStar Semiconductor
Development Fund (II), Inc., (incorporated in 2000). TSMC Development Inc. has a subsidiary, WaferTech, LLC, which
has been 57% owned since its formation, increased to 68% owned in 1998; TSMC Development Inc. acquired an
additional 29% and 2% at a purchase price of US$474,640 thousand and US$19,530 thousand in December 2000,
and June 2001, respectively, thereby increasing its proportionate interest to 99% as of December 31, 2001.
The following diagram presents information regarding the relationship and ownership percentages among TSMC and
its subsidiaries as of December 31, 2001:
TSMC
100%
100%
100%
100%
100%
25%
99%
TSMC-North America
TSMC-Japan
TSMC-International
TSMC-Europe
TSMC-Partners
America
Investment
Po Cheng
Investment etc.
Emerging Alliance
Fund
100%
100%
97%
97%
TSMC-Technology
TSMC-Development
InveStar
InveStar (II)
99%
WaferTech
94
T S M C A n n u a l R e p o r t 2 0 0 1
T S M C-North America, TSMC-Europe and TSMC-Japan are engaged mainly in marketing and engineering support
activities. Emerging Alliance Fund, TSMC Partners and Po Cherng Investment etc. are engaged in investments. TSMC
International Investment and its subsidiaries are engaged in investing in affairs focused on the design, manufacture,
and other related business of semiconductors. WaferTech, LLC. is engaged in the foundry business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The Company consolidates the accounts of all majority (directly and indirectly) owned subsidiaries. The consolidated
financial statements included, as of and for the year ended December 31, 2000 and 2001, the accounts of TSMC,
TSMC-North America, TSMC-Europe, TSMC-Japan, TSMC Partners, Emerging Alliance Fund, Po Cherng Investment, Chi
Hsin Investment, Kung Cherng Investment, Chi Cherng Investment, Hsin Ruey Investment, Cherng Huei Investment,
TSMC International Investment and its subsidiaries, InveStar Semiconductor Development Fund, Inc. and InveStar
Semiconductor Development Fund (II) Inc., TSMC Development Inc. (including WaferTech, LLC) and TSMC Technology
Inc. All significant inter-company accounts and transactions have been eliminated.
Minority interests in Emerging Alliance Fund, InveStar, InveStar (II) and Wa f e r Tech are presented separately in the
consolidated financial statements.
Cash and cash equivalents
Government bonds acquired under repurchase agreements that provide for their repurchase with less than three
months from date of purchase are classified as cash equivalents.
Short-term investments
Short-term investments are carried at the lower of cost or market value. The costs of investments sold are determined
using the specific identification method.
Allowance for doubtful receivable
Allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivable.
Sales and Allowance for sales returns and others
Sales are recognized when titles of products and risks of ownerships are transferred to customers, primarily upon
shipment. Allowance and related provisions for sales returns and others are provided based on experience; such
provisions are deducted from sales and related costs are deducted from cost of sales.
Inventories
Inventories are stated at the lower of cost or market value. Inventories are recorded at standard costs, and adjusted
to approximate weighted average cost at the end of each period. Market value represents net realizable value for
finished goods and work in process and replacement value for raw materials, supplies and spare parts.
Long-term investments
Investments in shares of stock of companies wherein the Company exercises significant influence on their operating
and financial policy decisions are accounted for using the equity method. The difference between the investment cost
and the Company's proportionate equity in the net assets of the investee on the date of acquisition is amortized over
five years using the straight-line method. Such amortization and the Company's proportionate share in the net
income or net loss of investee companies are recognized as components of "Equity in net income or net loss in
investee companies - net" account. When the Company subscribes to additional investee shares at a percentage
different from its existing equity interest, the resulting carrying amount of the investment in equity investee differs
from the amount of Company's proportionate share in the investee's net equity. The Company records such difference
as an adjustment to "Capital surplus" and the "Long-term investments" accounts, respectively.
T S M C A n n u a l R e p o r t 2 0 0 1
95
In the event an investee offsets its capital surplus, excluding reserve from asset revaluation, against its accumulated
deficit, which is recorded as debit to the "Capital surplus" account and a credit to "Retained earnings" account, the
Company also records the entry by its proportionate share of the investee capital surplus that was generated
subsequent to its acquisition of investee interest, excluding reserve from asset revaluation.
Other stock investments are accounted using the cost method. These investments are stated at cost less declines in
market value of listed stocks or declines in value of unlisted stocks which is considered irrecoverable; such reductions
are charged to shareholders' equity or current income, respectively. Cash dividends are recognized as income in the
year received but are accounted for as reduction in the carrying value of the long-term investment if the dividends
are received in the same year that the related investments are acquired. Stock dividends are recognized only as an
increase in the number of stocks held on the ex-dividend date.
Investments in foreign mutual funds are stated at the lower of cost or net asset value (NAV). Write-downs of cost and
write-ups to original acquisition cost resulting from subsequent recovery of the NAV are debited or credited to
shareholders' equity.
Investment in convertible notes and stock purchase warrants are carried at cost.
The costs of investments sold are determined using the weighted-average method.
The Company's proportionate share in the gains from disposal of property, plant and equipment, net of the
applicable income tax, included as part of its share in the earnings or losses of investee companies accounted for
using the equity method for the current year is reclassified into capital surplus from retained earnings. When the
Company subsequently disposes such investment in shares of stock, such capital surplus shall be reclassified back
retained earnings. Also, if an investee company has unrealized loss on long-term investment which is evaluated by
lower-of-cost-or-market method, the Company should recognize that unrealized loss in proportion to the Company's
equity interest and record in an account as a component of shareholders' equity.
Gains or losses on transactions with investee companies accounted using the equity method are eliminated in
proportion to the Company's ownership percentage while those with majority-owned subsidiaries are eliminated
entirely in consolidation.
Property, plant and equipment and assets leased to others
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Major
additions, renewals, betterment and interest expenses incurred during the construction period are capitalized.
Maintenance and repairs are expensed currently. Property, plant and equipment covered by agreements qualifying as
capital leases are carried at the lower of the present value of all minimum future rental payments, or the market value
of the property at the inception date of the lease. The lessee's periodic rental payment includes the purchase price of
the leased property, and the interest expense.
Depreciation is computed using the straight-line method over estimated service lives which range as follows: Land
improvements - 20 years, buildings - 10 to 20 years, machinery and equipment - 5 to 10 years, office equipment - 3
to 7 years.
Upon sale or disposal of an item of property, plant and equipment, the related cost and accumulated depreciation
are removed from the accounts, and any gain or loss is credited or charged to income. Any such gain, less applicable
income tax, is reclassified to capital surplus at the end of the year (before the relevant regulation was amended).
96
T S M C A n n u a l R e p o r t 2 0 0 1
Consolidated debits
Consolidated debits include the goodwill arose from the business merger and the difference between the investment
cost and the Company's proportionate share in the net asset of the investee companies at the date of acquisition.
Consolidated debits are amortized by the straight-line method over 10 years.
Deferred charges
Deferred charges consist of software and system design costs, technology know-how, bond and financing issue costs,
and technology license fee. These are amortized as follows: software and system design costs - three years,
technology know-how - five years, bond issue costs - the term of the bonds; financing costs - term related line of
credit, and technology license fee - the term of the contract or economic useful lives of the related technology.
Pension costs
Net periodic pension costs are recorded on the basis of actuarial calculations. Unrecognized net transaction
obligation and unrecognized net gain are amortized over 25 years.
Deferred gain on sale - leaseback
The gain resulting from the sale of leased property is deferred. Such deferred gain is then amortized as follows: (a)
operating lease - adjustment of rental expenses over the term of the lease, and (b) capital lease - adjustment of
depreciation over the estimate useful lives or term of the lease; whichever is shorter.
Income tax
The Company adopted inter-period income tax allocation method. Deferred income tax assets are recognized for the
tax effects of temporary differences, unused tax credits and operating loss carry forwards. Valuation allowance is
provided for deferred income tax assets that are not certain to be realized. A deferred tax asset or liability is,
according to the classification of its related asset or liability, be classified as current or non-current. However, if a
deferred asset or liability cannot be related to an asset or liability in the financial statements, then it is classified as
current or non-current based on the expected reversal date of temporary differences.
Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.
Income taxes (10%) on unappropriated earnings of TSMC are recorded as expenses in the year when the shareholders
have resolved that the earnings shall be retained.
Derivative financial instruments
Foreign currency forward exchange contracts (forward contracts), entered into for purposes other than trading are
recorded as follows: The differences in the New Taiwan dollar amounts translated using the spot rates and the
amounts translated using the contracted forward rates are amortized over the terms of the forward contracts using
the straight-line method. At the balance sheet dates, the receivables or payables arising from forward contracts are
restated using the prevailing spot rates and the resulting differences are recognized in income. Also, the receivables
and payables related to the forward contract are netted out and the resulting net amount is presented as either an
asset or liability.
The Company enters into interest rate swap transactions to manage exposures to changes in interest rates on existing
liabilities. These transactions are accounted for on an accrual basis, in which cash settlement receivable or payable is
recorded as an adjustment to interest income or expenses.
The notional amounts of the foreign currency option contracts entered into for hedging purposes are not recognized
as either assets or liabilities on the contract dates. The amount paid or received (or premiums) for the call or put
T S M C A n n u a l R e p o r t 2 0 0 1
97
options are amortized using the straight-line method over the terms of the contracts.
Other foreign-currency transactions
Other foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the
transactions occur. Gains or losses caused by the application of different foreign exchange rates when cash in foreign
currency is converted into New Taiwan dollars, or when foreign-currency receivables and payables are settled,
credited or charged to income in the year of conversion or settlement. At year-end, the balances of foreign-currency
assets and liabilities are restated based on prevailing exchange rates and any resulting gains or losses are credited or
charged to income.
Translation of foreign-currency financial statements
ROC Financial Accounting Standards (FAS) No. 14, "Accounting for Foreign-Currency Transactions," applies to foreign
operations where the local currency of each foreign subsidiary is its functional currency. The financial statements of
such foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: assets and liabilities
- current rate; shareholders' equity - historical rates; income and expenses - weighted average rate during the year.
The resulting translation adjustment is recorded as a separate component of shareholders' equity.
Reclassifications
Certain accounts in 2000 have been reclassified to conform to 2001 classifications.
Mergers
The acquisition of TASMC was accounted for under the Statement of Financial Accounting Standards No. 25 "Business
Combination - Purchase Method". On the other hand, the merger with WSMC was accounted for as pooling of
interest with the results of operations of WSMC included in the statement of income for the year ended December
31, 2000.
Pro forma net sales, net income and earnings per share of TSMC on the assumption that the aquisition of TASMC was
completed as of January 1, 2000 are as follows:
Net sales
Net income
Earnings per share
Based on weighted-average number of shares
outstanding - 16,729,401 thousand shares in 2000
The individual operating results of TASMC before the mergers on June 30, 2000 are as follows:
Net sales
Net loss
2000
$170,132,350
65,050,836
$3.89
$3,934,746
(55,358)
98
T S M C A n n u a l R e p o r t 2 0 0 1
3. SIGNIFICANT ELIMINATING ENTRIES
The details of transactions with companies included in the consolidated financial statements are as follows:
Company
TSMC
Account
Amount
Transaction Entity
Payable to related parties
$817,616
WaferTech, LLC
136,443
TSMC-North America
54,601
15,355
10,318
25,251
3,878
TSMC-Europe
TSMC-Japan
TSMC-Technology
WaferTech, LLC
TSMC-Technology
3,111
WaferTech, LLC
6,797,817
WaferTech, LLC
Receivable from related
parties
Sales
Purchase
Marketing expenses -
1,028,725
TSMC-North America
commissions
Marketing expenses -
service charges
Notes receivable
Interest receivable
Royalty income
Interest revenue
Notes receivable
Accounts payable
Deferred revenue
Royalty income
Interest revenue
Accounts receivable
Deferred revenue
Sales
Royalty income
TSMC
International
Investment
TSMC Partners
TSMC-
Technology
4. CASH AND CASH EQUIVALENTS
Cash and bank deposits
Government bonds acquired under repurchase agreements
194,696
124,384
118,648
TSMC-Japan
TSMC-Europe
TSMC-North America
349,990
181,352
TSMC-Technology
TSMC-Technology
1,223,373
TSMC-Technology
26,269
TSMC-Technology
11,344,120
TSMC International Investment
6,888
TSMC-North America
10,079,712
TSMC International Investment
1,220,256
TSMC International Investment
712,046
TSMC International Investment
7,960
28,395
57,501
14,473
WaferTech, LLC
WaferTech, LLC
WaferTech, LLC
WaferTech, LLC
2001
$35,830,636
1,725,659
$37,556,295
2000
$38,229,510
610,707
$38,840,217
T S M C A n n u a l R e p o r t 2 0 0 1
99
5. SHORT-TERM INVESTMENTS
Listed stocks
Market value
2001
$1,398,071
$6,917,133
2000
$1,502,098
$6,117,525
The market values of listed stocks as of December 31, 2001 and 2000 were based on average closing price in
December 2001 and 2000, respectively.
6. INVENTORIES - NET
Finished goods
Work in process
Raw materials
Supplies and spare parts
Less - allowance for losses
7. LONG-TERM INVESTMENTS
2001
$1,790,305
7,374,752
744,719
1,110,323
11,020,099
(1,191,771)
$9,828,328
2000
$1,762,287
9,455,492
770,884
1,364,686
13,353,349
(567,626)
$12,785,723
2001
2000
Carrying
Value
%of
Owner-
Ship
Carrying
Value
% of
Owner-
Ship
Common stocks
Accounted for by equity method:
Vanguard International Semiconductor (VIS)
$3,377,526
(Publicly traded)
Systems on Silicon Manufacturing Company Pte Ltd.
(SSMC) (non-traded)
Accounted for by cost Method:
Traded
Amkor Technology
Taiwan Mask
Non-traded
Global Test Corp.
United Technology
Hong Tung Venture Capital
Shin-Etsu Handotai Taiwan Company Ltd.
Global Investment Holding
ChipStrate Technology
(Forward)
$2,907,967
6,285,493
280,748
32,129
179,951
193,584
150,000
105,000
107,270
69,658
25
32
-
2
10
11
10
7
6
9
$5,615,075
$935,870
6,550,945
-
32,129
175,731
146,250
120,000
105,000
-
69,551
25
32
-
2
10
10
10
7
-
9
100
T S M C A n n u a l R e p o r t 2 0 0 1
Programmable Microelectronics
APE
W.K. Technology Fund IV
Richtek Technology, Inc.
EmpowerTel Networks
3Dfx Interactive
Ubicom, Inc. (Scenix)
Capella Microsystems
EquatorTechnologies
Divio
Taiwan Semiconductor
Technology
Preferred stocks (all non-traded)
Sonics
EmpowerTel Networks
Tropian, Inc
Atheros Communications
Menolithic Power System
Quickilver Technology
LightSpeed Semiconductor
Memsic
Equator Technologies
Pixim
OEpic
Capella Microsystems
Signia
Newport Opticom
RapidStream
Formfactor
Reflectivity
NanoAmp Solutions
NetLogic Microsystems
Integrated Memory Logic
Match Lab
Y-MEDIA
Rise Technology
Creosys
Ikanos Communication
Ralink Technology
SiRF Technology
Ubicom, Inc. (Scenix)
Advanced Angalogic Technology
OmegaBand (Seagull)
Pico Turbo
(Forward)
59,296
46,748
50,000
45,015
12,031
10,396
6,028
4,740
3,151
105
-
1,355,850
231,397
179,480
151,688
125,754
123,037
122,497
107,251
107,088
99,358
87,498
87,497
80,441
78,748
77,124
73,754
69,998
69,998
64,838
64,748
63,318
61,249
52,499
52,498
52,498
52,498
52,498
51,248
47,636
44,131
43,749
43,749
4
6
2
10
1
-
2
2
-
-
-
7
7
5
2
18
29
1
20
2
3
6
8
20
15
6
1
6
3
1
10
10
2
2
8
3
7
1
2
2
6
7
49,619
46,677
50,000
9,975
-
9,826
5,697
345
2,978
-
4
6
4
9
-
-
2
-
-
-
500,000
19
1,323,778
116,752
169,634
77,209
-
66,158
-
101,368
82,689
93,908
-
24,809
42,949
49,619
-
69,708
66,158
66,158
61,281
-
59,845
49,619
-
49,619
49,619
-
-
44,105
45,023
-
41,349
41,349
7
7
5
-
17
-
6
24
2
-
-
8
22
-
6
1
6
3
-
10
11
-
2
8
-
-
1
2
-
14
9
T S M C A n n u a l R e p o r t 2 0 0 1
101
Sensory
HINT Corporation
Litchfield
Quake Technology
Procoat Technology
Angstron System
Divio
Incentia Design Systems
Silicon Data, Inc.
T-Span System
Lara Networks Inc.
FabCentric
Convertible notes (all non-traded)
Rise Technology
Pico Turbo
OmegaBand
FabCentric
Signia Technologies
Advanced Analogic Technology
Funds
BIAM Global Opportunity Fund
Horizon Ventures
Crimson Asia Capital
Warrant
OEpic
Less - allowance for losses
43,749
34,999
34,999
34,999
30,000
26,249
17,500
17,499
8,750
-
-
-
4
5
6
1
10
7
4
2
2
-
-
-
41,349
33,079
-
-
-
-
16,540
16,539
-
45,829
75,151
8,270
2,868,509
1,705,685
10,500
10,323
6,730
-
-
-
27,553
908,944
125,701
27,091
1,061,736
9
11,599,150
-
-
-
-
-
-
-
-
-
-
-
9,924
-
-
8,270
16,540
41,349
76,083
959,561
93,304
64,547
1,117,412
-
10,773,903
(110,099)
$11,599,150
$10,663,804
6
5
-
-
-
-
4
2
-
3
7
-
-
-
-
-
-
-
-
-
-
-
The equity in net income or (net loss) of investee companies consisted of the following:
VIS
SSMC
TASMC
2001
($2,236,940)
(1,722,080)
-
($3,959,020)
2000
$597,812
(473,661)
(311,330)
($187,179)
102
T S M C A n n u a l R e p o r t 2 0 0 1
The carrying values of equity-accounted investments and the related equity in net income or net loss were based on
audited of financial statements in the same periods.
Information on the long-term investments is as follows:
Market value of traded stocks
Equity in the net assets of non-traded stocks
Net asset value of funds
8. PROPERTY, PLANT AND EQUIPMENT
Accumulated depreciation consisted of the following:
Land improvements
Buildings
Machinery and equipment
Office equipment
2001
$7,056,942
8,286,549
1,202,453
2001
$108,770
16,604,096
136,033,250
3,202,844
$155,948,960
2000
$8,729,639
5,466,227
1,007,313
2000
$64,006
10,692,112
90,956,200
2,172,561
$103,884,879
Information on the status of the expansion or construction of TSMC's manufacturing facilities as of December 31,
2001 is as follows:
EstimatedAccumulatedExpected or Actual
CostExpendituresOperations Start Date
Fab 6
Fab 7
Fab 8
Fab 12 - 1st stage
Fab 14 - 1st stage
$76,889,000
5,930,500
28,322,100
38,280,800
9,711,000
$69,986,000
2,867,500
11,355,300
28,988,700
8,449,600
Manufacturing Plant
March 2000
March 2001
March 2001
April 2002
June 2003
Interest expense (before deducting capitalized amounts of NT$507,094 thousand and NT$541,078 thousand in 2001
and 2000, respectively) for the years ended December 31, 2001 and 2000 were NT$3,651,136 thousand and
NT$3,258,113 thousand, respectively. The interest rates used for purpose of calculating the capitalized amount were
2.54% to 5.283% in 2001 and 6.62% to 7.663% in 2000.
9. DEFERRED CHARGES - NET
Software and system design costs
Technology license fee
Bond and financing issue costs
Technology know-how
Others
2001
$2,073,802
996,578
150,142
103,500
445,728
$3,769,750
2000
$1,420,635
1,442,292
142,881
157,500
172,357
$3,335,665
T S M C A n n u a l R e p o r t 2 0 0 1
103
10. SHORT-TERM BANK LOANS
2001
2000
Secured loan in NT dollars
NT$ 107,100 thousand, repayable by October 2002,
annual interest at 3.2%~3.8%
$107,100
NT$ 329,375 thousand, repayable by October 2001,
annual interest at 5.8%
Secured loan in US dollars:
US$6,942 thousand, repayable by December
2001, annual interest of 9.25%
Unsecured loan:
US$ 82,000 thousand, repayable by March 2002,
annual interest at 2.679%
US$5,500 thousand, repayable by June 2002,
annual interest at 3.188%
US$21,565 thousand, repayable by October 2002,
annual interest at 2.590%
US$46,000 thousand, repayable by October 2002,
annual interest at 2.548%
US$21,000 thousand, repayable by May 2002,
annual interest at 2.33%
US$70,000 thousand, repayable by March 2001,
annual interest at 7.53%
US$29,000 thousand, repayable by January, 2001,
annual interest at 7.05%
-
-
2,869,918
192,495
754,735
1,609,954
734,979
-
-
$6,269,181
$-
329,375
229,645
-
-
-
-
-
2,315,530
959,291
$3,833,841
Unused credit lines as of December 31, 2001 aggregated approximately NT$17,941,000 thousand (including
NT$6,571,900 thousand and US$324,836 thousand).
As of December 31, 2001, the NT$107,100 thousand loan is secured by short-term investment with carrying amount
of NT$71,400 thousand.
11. LONG-TERM BANK LOANS
Secured loan:
US$440,000 thousand, repayable by February
2001
2000
2005, annual interest at 2.578%
$15,399,560
$-
US$438,000 thousand, repayable by March 2005,
annual interest at 7.663%
Unsecured loan:
US$200,000 thousand, repayable by December 2003,
annual interest at 2.54% and 6.91% in 2001 and 2000,
-
14,488,602
respectively
6,999,800
US$46,000 thousand, repayable by October 2002,
annual interest at 7.36%
US$21,564 thousand, repayable by October 2002,
annual interest at 7.41%
-
-
$22,399,360
6,615,800
1,521,634
713,331
$23,339,367
104
T S M C A n n u a l R e p o r t 2 0 0 1
Unused credit lines for long-term bank loans as of December 31, 2001 aggregated approximately NT$4,321,000
thousand (including NT$3,000,000 thousand and US$37,750 thousand).
Future minimum principal payments under the Company's loan arrangements as of December 31, 2001 are as
follows:
Year
2003
2004
2005
Amount
$6,999,800
-
15,399,560
$22,399,360
As of December 31, 2001, the US$440,000 thousand loan is secured by the total assets of WaferTech, LLC with carrying amount of
approximately NT$28,378,000 thousand (US$811,000 thousand). In addition, a portion of the unused credit line for long-term
bank loans is secured by properties owned by TSMC with carrying value of approximately NT$1,378,000 thousand.
12. BONDS
Domestic unsecured bonds:
Repayable in March 2003, 7.71% annual interest
2001
2000
payable semi-annually
$4,000,000
$4,000,000
Repayable in October 2002 and 2004, 5.67% and
5.95% annual interest payable annually, respectively
10,000,000
10,000,000
Repayable in December 2005 and 2007, 5.25% and
5.36% annual interest payable annually, respectively
15,000,000
$29,000,000
15,000,000
$29,000,000
Future minimum principal payments under the Company's bonds arrangements as of December 31, 2001 are as
follows:
Year of Repay
2002
2003
2004
2005
2006 and thereafter
Less - current portion
Amount
$5,000,000
4,000,000
5,000,000
10,500,000
4,500,000
29,000,000
(5,000,000)
$24,000,000
On November 6, 2001, the board of directors approved the issuance of domestic unsecured bonds with an aggregate
principal amount of NT$15,000,000 thousand. The issuance of the domestic unsecured bond has been approved by
the Securities and Futures Commission of ROC (SFC). As of January 18, 2002, the issuance is still in process.
T S M C A n n u a l R e p o r t 2 0 0 1
105
13. SHAREHOLDERS' EQUITY
As of December 31, 2001, the Company has issued 259,006 thousand American Depositary Shares (ADS) that are
listed on the New York Stock Exchange. The number of common shares represented by the ADSs is 1,295,031
thousand shares.
The SFC has, on January 4, 2002, approved the Company's sponsorship of the offer by certain existing shareholders of
up to 350,000 thousand common shares in the form of ADSs. The decision to sponsor the offering of common
shares in the form of ADSs was approved by the Board of Directors on December 3, 2001. The offering is still in
process as of January 18, 2002.
Capital surplus except for that arising from the application of the equity method of accounting, pursuant to ROC
Company Law, can only be used to offset a deficit or transferred to capital (as a stock dividend). Such transfer from
capital surplus to capital can only be made once a year at a specific percentage. An amendment to the ROC
Company Law issued on November 14, 2001, limited the nature of the capital surplus that can be used to offset a
deficit or transferred to capital (as a stock dividend) to those that arise from donations (donated capital) and those
attributable to the excess of the issue price over the par value of capital stock issued.
The Company's Articles of Incorporation provide that the following shall be appropriated from annual net income
(less any deficit):
a. 10% legal reserve;
b. Special reserve in accordance with relevant laws or regulations;
c. Bonuses to directors and supervisors and to employees equal to 1% and at least 1% of the remainder, respectively;
d. Dividends to holders of preferred shares equal to a 3.5% annual rate, based on the period during which the
preferred shares have been outstanding;
e.The appropriation of the remaining balance after the above shall be decided at the shareholder's meeting;
Dividends are distributed in cash and/or in the form of shares of stock. Since the Company is in a capital-intensive
industry, distribution of profits shall be made preferably by way of stock dividend. The total of cash dividend paid (in
any given year) should not exceed 50% of total dividends paid and/or distributed.
These appropriations of net income shall be resolved by the shareholders in the following year and given effect in the
financial statements of that year.
The aforementioned appropriation for legal reserve shall be made until the reserve equals the aggregate par value of
the Company's outstanding capital stock. The reserve can only be used to offset a deficit; or, when its balance has
reached 50% of the aggregate par value of the outstanding capital stock of the Company, up to 50% thereof can be
distributed as stock dividend.
Pursuant to existing regulations promulgated by the Securities and Futures Commission, a special reserve equivalent
to the debit balance of any account shown in the shareholder equity section of the balance sheets, other than the
deficit, shall be made from unappropriated retained earnings. The special reserve shall be adjusted accordingly based
on the debit balance of such accounts as at year-end. As of December 31, 2001, prior year's accumulated deficit in
the amount of NT$1,803,168 thousand from WSMC is included in the unappropriated retained earnings.
Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident shareholders are
allowed a tax credit for the income tax paid by the Company on earnings generated starting January 1, 1998. An
Imputation Credit Account (ICA) is maintained by the Company for such income tax and the tax credit allocated to
106
T S M C A n n u a l R e p o r t 2 0 0 1
each shareholder. The maximum credit available for allocation to each shareholder cannot exceed the balance shown
in the ICA on the date of distribution of dividends.
The Company issued 1,300,000 thousand unlisted Series A - preferred shares to certain investors in November 29,
2000. The following are the rights of the preferred share holders and other terms and conditions:
a. Are entitled to receive cumulative cash dividends at an annual rate of 3.5%.
b. Are not entitled to receive any stock dividends (whether declared out of unappropriated earnings or capital
surplus).
c. Have priority over the holders of common shares to the assets of the Company available for distribution to
shareholders upon liquidation or dissolution of the Company. However, the preemptive rights to the assets shall
not exceed the issue value of the shares.
d. Have voting rights similar to that of the holders of common shares.
e. Have no right to convert their shares into common shares.
f. Will be redeemed within thirty months from their issuance. The terms and conditions in respect to the issuance of
the preferred shares provides that, until the shares are redeemed, their holders
14. PENSION PLAN
TSMC has a pension plans for all regular employees, which provides benefits based on length of service and average
monthly salary for the final six months of employment.
TSMC makes monthly contributions, equal to 2% of salaries to a pension fund (the "Fund"). The Fund is administered
by a pension fund monitoring committee and deposited in the committee's name in the Central Trust of China. In
addition, the Company accrues unfunded pension cost.
The changes in the fund and accrued pension costs are summarized as follows:
a. Components of pension cost
Service cost
Interest cost
Projected return on plan assets
Amortization
b. The details of the benefit obligation and reconciliation of the
fund status of the plan and accrued pension cost is as follows
Benefit obligation
Vested benefit obligation
Nonvested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
(Forward)
2001
2000
$417,967
95,920
(43,968)
8,300
$478,219
$739
1,024,525
1,025,264
1,407,014
2,432,278
$376,689
91,234
(26,675)
8,300
$449,548
$-
763,879
763,879
1,550,009
2,313,888
T S M C A n n u a l R e p o r t 2 0 0 1
107
Fair value of plan assets
Funded status
Unrecognized net transitional obligation
Unrecognized net gain
Accrued pension cost
c. Actuarial assumptions
Discount rated used in determining present values
Future salary increase rate
Expected rate of return plan on assets
d. Contributions to pension fund
e. Funds transferred from TASMC and WSMC
f. Payments from pension fund
15. INCOME TAX
(835,583)
1,596,695
(157,691)
415,849
$1,854,853
5.0%
5.0%
5.0%
$131,894
$-
$-
(661,099)
1,652,789
(165,991)
22,737
$1,509,535
6.0%
6.0%
6.0%
$95,932
$173,339
$1,458
a. A reconciliation of income tax expense - current before tax credits and income tax expense on income before
income tax at statutory rate is shown below:
Income tax expense on "income before income tax"
at statutory rate
Tax-exempt income
Temporary differences
Income tax expense - current before tax credits
b. Income tax benefits consist of:
Income tax expense - current before tax credits
Additional 10% on the unappropriated earnings
Income tax credits
Other income tax
Income tax for the current year
Net change in deferred income tax assets (liabilities)
for the year
Investment tax credits
Temporary differences
Valuation allowance
Adjustment of prior years' taxes
2001
2000
($2,699,626)
1,089,000
(986,598)
($2,597,224)
2001
($2,597,224)
(322,292)
2,888,358
(16,318)
(47,476)
3,044,170
(1,918,009)
2,661,993
-
$3,740,678
($12,787,660)
7,770,000
(49,497)
($5,067,157)
2000
($5,067,157)
(88,024)
5,128,024
-
(27,157)
3,146,369
(462,230)
(1,678,791)
189,693
$1,167,884
108
T S M C A n n u a l R e p o r t 2 0 0 1
c. Deferred income tax assets (liabilities) consisted of:
2001
2000
Current:
Investment tax credit
Temporary differences
Less - valuation allowance
Noncurrent:
Investment tax credits
Temporary differences
Less - valuation allowance
$2,347,000
3,147
2,350,147
-
$2,350,147
$21,710,461
(2,363,913)
19,346,548
(3,100,720)
$16,245,828
$8,422,000
56,016
8,478,016
(300,000)
$8,178,016
$12,591,291
(498,773)
12,092,518
(5,462,713)
$6,629,805
The effective rates for deferred income tax of TSMC were 17.56% and 7.54% as of December 31, 2001 and 2000,
respectively, and 34%~41% and 32%~54% for TSMC's subsidiaries as of December 31, 2001 and 2000, respectively.
d. Integrated income tax information:
The balances of the imputation credit account (ICA) as of December 31, 2001 and 2000 were $9,365 thousand and
$5,888 thousand, respectively.
The tax credit ratio computed as of December 31, 2001 was 0.02% while the tax credit on earnings as of December
31, 2000 on dividend distributed in 2001 was 0.01%.
The imputation credit allocated to each shareholder shall be based on the balance in the ICA on the date of
distribution of dividends; thus the expected creditable ratio for 2001 may be adjusted according to the difference
between the expected and actual imputation credit allowed under the regulation.
e. The unappropriated retained earnings as of December 31, 2001 and 2000 included the earnings generated up to
December 31, 1997 of $4,827 thousand.
f. Unused investment tax credits arising from purchase of machinery and equipment, and research and development
expenditures as of December 31, 2001 will expire as follows:
Year of Expiry
2002
2003
2004
2005
Amount
$4,487,894
5,500,778
10,720,895
3,347,894
$24,057,461
T S M C A n n u a l R e p o r t 2 0 0 1
109
g. The income from the following expansion and construction of TSMC's manufacturing plants is exempt from income
tax:
Expansion of Fab1 and Fab2-modules A and B, Fab3 and Fab4, and construction of Fab5
Expansion of Fab7
Tax-Exemption Period
1999 to 2002
1998 to 2001
h. The tax authorities have examined income tax returns of TSMC through 1999, excluding 1998. However, TSMC is
contesting the assessment of the tax authority for 1992, 1993, 1996 and 1997.
16. RELATED PARTY TRANSACTIONS
The Company engaged in business transactions with the following related parties:
a. Industrial Technology Research Institute (ITRI), the Chairman of TSMC is one of the directors of ITRI.
b. Philips Electronics N.V., (Philips), a major shareholder of TSMC.
c.
Investees of TSMC
Vanguard International Semiconductor Corporation (VIS)
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
The transactions with the aforementioned parties, in addition to those disclosed in other notes, are summarized as
follows:
For the year
Sales
Philips and its affiliates
VIS
ITRI
SSMC
Purchase
VIS
SSMC
Rental expense - ITRI
Manufacturing expenses
Technical service fee - Philips
Sales of property, plant and equipment - VIS
Non-operating income
SSMC
VIS
Others
-(Forward)
110
T S M C A n n u a l R e p o r t 2 0 0 1
2001
2000
Amount
%
Amount
%
$2,389,257
1,177,094
114,546
48,972
$3,729,869
$3,801,975
$42,984
$3,844,959
$161,604
2
1
-
-
3
22
-
22
11
$2,418,276
100
$268,871
85
$95,284
467
-
$95,751
1
-
-
3
$5,289,927
17,012
198,146
-
$5,505,085
$6,572,110
$-
$6,572,110
$161,575
$2,137,175
$87,189
$152,347
5,604
38
$157,989
3
-
-
-
3
19
-
19
14
86
37
3
-
-
3
At end of the year
Receivables
VIS
Philips and its affiliates
ITRI
SSMC
Prepaid expense and other current asset
Advance rent - ITRI
Payables
VIS
Philips and its affiliates
SSMC
$320,179
116,499
37,383
20,671
65
24
7
4
$159,890
643,604
56,078
89,154
17
68
6
9
$494,732
100
$948,726
100
$42,664
2
$42,664
6
$548,472
499,331
470
52
48
-
$1,808,964
797,375
-
69
31
-
$1,048,273
100
$2,606,339
100
Sales to related parties are based on regular selling prices and collection terms, except for sales of properties and
technical service fee, which were in accordance with the related contracts.
17. SIGNIFICANT LONG-TERM OPERATING LEASES
TSMC leases from ITRI the land, building and certain machinery and equipment of its first manufacturing facility
under agreements that will expire in March 2002. The annual rental under such agreement amounts to $161,604
thousand.
TSMC leases the land where its 2nd through 14th manufacturing facilities are located from the Science-Based
Industrial Park Administration. The related agreements will expire on various dates from March 2008 to December
2020 and have annual rentals aggregating NT$208,716 thousand. The agreements can be renewable upon their
expiration.
TSMC-North America, a subsidiary, leases its office premises and certain equipment under a non-cancelable operating
agreement, which will expire in September 2020. TSMC-Europe entered into a lease agreement covering its office
premise, which will expire in 2004. Annual rental currently totaled to $101,395 thousand.
Future annual minimum rentals under the aforementioned leases are as follows:
Year
2002
2003
2004
2005
2006
2007 and thereafter
Amount
$347,699
310,111
312,924
311,195
314,180
2,218,404
$3,814,513
T S M C A n n u a l R e p o r t 2 0 0 1
111
18. SIGNIFICANT COMMITMENTS AND CONTINGENCY AS OF DECEMBER 31, 2001
The commitments and contingency of the Company and its subsidiaries as of December 31, 2001 are as follows:
a. Under a Technical Cooperation Agreement with Philips, as amended on May 12, 1997, TSMC shall pay technical
assistance fees as a percentage of net sales, as defined in the agreement, of certain products. The agreement shall
remain in force up to July 9, 2007 and thereafter be automatically renewed once for successive periods of three
years. Under the amended agreement, the fee is subject to deduction by the amounts TSMC pays to any third
party for settling any licensing/infringement issue after the first five-year period of the amended agreement,
provided that the fee after reduction will not be below a certain percentage of the net selling price.
b. Subject to certain equity ownership and notification requirements, Philips and its affiliates can avail themselves
each year up of to 30% of TSMC production capacity.
c. Under a Technical Cooperation Agreement with ITRI, TSMC shall reserve and allocate up to 35% of certain of its
production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the
MOEA.
d. Under several foundry agreements, TSMC shall allocate a portion of its production output for sale to certain major
customers from whom guarantee deposits of US$205,949 thousand had been received as of December 31, 2001.
e. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. dated March 30, 1999,
the parties agreed to: (a) form a joint venture company to be named Systems on Silicon Manufacturing Company
Pte Ltd. (SSMC) for the purpose of constructing an integrated circuit foundry in Singapore, (b) set SSMC's total
authorized capital at about S$1.2 billion, and, (c) allow TSMC to invest in 32% of SSMC's capital. As of December
31, 2001, the aggregate amount of investments from these parties has not reached S$1.2 billion. TSMC
and Philips committed to buy a specific percentage of the production capacity of SSMC. If any party defaults on
the agreement and the capacity utilization of SSMC falls below a specific percentage of its total capacity, the
defaulting party should compensate SSMC for all related unavoidable costs.
f. Provision of technical services to SSMC under a Technical Cooperation Agreement (the "Agreement") entered into
on May 12, 1999. TSMC should receive compensation for such services computed at a specific percentage of net
selling prices of specific products sold by SSMC. The Agreement remains in force for ten years and is automatically
renewed once for successive periods of five years unless pre-terminated by either party under certain conditions.
g. Under a Technical Transfer Agreement with National Semiconductor Corporation ("National") entered into on June
27, 2000, TSMC shall receive payments for the technology transferred to National. The agreement will remain in
force for ten years. After expiration, this agreement will be automatically renewed for successive periods of two
years unless pre-terminated by either party under certain conditions.
h. TSMC entered into a Manufacturing Agreement with Vanguard International Semiconductor Corp. ("VIS"). VIS
agrees to reserve specific capacity to manufacture for TSMC certain devices on logic or other technologies required
by TSMC's customers, at a discount to the selling prices as agreed by the parties. TSMC paid $1,200,000 thousand
to VIS as Security Bond. VIS shall return portions of the Bond without any interest to TSMC upon the purchase of
wafers by TSMC. The contract will remain in force for five years.
i. Under a management agreement, InveStar Capital In. (ISC) of the Cayman Islands, provides investment and
administrative services to TSMC. ISC should receive quarterly, starting from October 1, 1996, a management fee of
2% each year of total weighted average paid-in capital and capital surplus of TSMC, excluding retained earnings
and losses.
112
T S M C A n n u a l R e p o r t 2 0 0 1
j. Under a patent license agreement, TSMC has entered into a cross license arrangement for certain semiconductor
patents with a US-based company for a term starting from October 26, 2001 through December 31, 2006. TSMC
shall pay royalty fees to the such company.
k. WaferTech, subsidiary, had recorded a reserve of US$ 16,000 thousand for a litigation arising from a charge by
certain contractors that WaferTech caused the contractors to incur additional labor and material costs outside the
contracts. The reserve is reflected in accrued construction and equipment payable with the offset to construction
in progress. Payment of the settlement amount will be made in four installments throughout fiscal year 2000. The
remaining accrued serve of US$5,250 thousand is sufficient for payments to the other construction contractors, in
the year of 2002.
l.
In 1996, Wa f e r Tech adopted an Executive Incentive Plan, which was amended in 1997. Under the 1997
amendment, the Board of Directors approved the Senior Executive Incentive Plan and the Employee Incentive Plan
("Plan") under which officers, key employees and nonemployee directors may be granted option rights. However,
WaferTech is a limited liability company and does not have shares of stock. Thus, each option right granted under
the Plan provides grantees rights to buy ownership interests in Wa f e r Tech. The Plans also provides for
approximately 6% of the total ownership interests to be available for grant, represented by 15.15 million-option
rights. For option rights granted to date, the option purchase price exceeded fair value as of the date of the grant.
While Wa f e r Tech may grant employees option rights that are exercisable at different times or within different
periods, it has generally granted option rights which are exercisable on a cumulative basis in annual instalments of
25% each on the first, second, third, and fourth anniversaries of the date of grant.
The following table summarizes information about the Plans:
Balance, January 1, 2000
Additional option rights authorized
Options granted
Option price > fair market value
Options exercised
Options cancelled
Balance, December 31, 2000
Options granted
Option price > fair market value
Options exercised
Options cancelled
Balance, December 31, 2001
Option Rights
Available For Grant
4,154,597
1,650,000
(3,203,302)
-
1,180,871
3,782,166
-
-
825,906
4,608,072
Outstanding Rights Option
Number of
Option Rights
8,226,080
-
3,203,302
(3,411,867)
(1,180,871)
6,836,644
-
(2,949,358)
(825,906)
3,061,380
Exercise
Price (US$)
0.78
-
1.86
0.74
1.09
1.23
-
1.02
1.27
1.43
These options will expire if not exercised at specific dates between May 2006 to December 2010.
m.Wa f e r Tech has received a tax assessment from State of Washington Department of Revenue assessing
approximately US$6,900 thousand in additional taxes related to State's sales and use tax. The tax amount resulted
from a difference in interpretation of the current tax code and WaferTech intends to appeal the assessment. As of
December 31, 2001, Wa f e r Tech has recorded a reserve that management believes is sufficient to address any
exposure from potential tax.
n. TSMC-North America started a stock appreciation right program from December 1, 2000 whereby the employees
received cash bonuses based on the appreciation of the quoted market price of the shares of stock of TSMC.
Compensation expenses are recorded based on the difference between the grant price and market price at the end
T S M C A n n u a l R e p o r t 2 0 0 1
113
of each period. This expense is recognized ratably over the vesting period and adjusted based on period
fluctuations in the stock. As of December 31, 2001, TSMC-North America has recorded compensation expense and
related accrued liabilities of approximately US$3,900 thousand.
o. Unused letter of credits as of December 31, 2001 were $1,200 thousand.
19. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFC for TSMC and subsidiaries:
a. Financing provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held: Please see Table 3 attached;
d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in
capital: Please see Table 4 attached;
e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: Please see
Table 5 attached;
f. Disposal of individual real estates at prices of at least NT$100 million or 20% of the paid-in capital: None;
g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Please see Table 6 attached;
h. Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see
Table 7 attached;
i. Names, locations, and related information of investee on which the Company exercises significant influences:
Please see table 8 attach.
j. Financial instrument transactions:
1) Derivative financial instruments
The relevant information on the derivative financial instruments entered into by TSMC is as follows:
a) Open forward exchange contracts as of December 31, 2001
Contract
Currency
Sell
Sell
US$
US$
Contract
Amount
(Thousand)
US$17,912
Fair Value
(Thousand)
Settlement Date
Maturity
NT$618,206
Jan. 2002
NT$620,600
US$783,000
NT$26,985,688
Jan. 2002-Mar.2002
NT$27,013,402
Payables from forward exchange contracts (shown in the balance sheet as part of "Other current liabilities"
account) as of December 31, 2001 aggregated to $397,117 thousand. Net exchange loss for the year ended
December 31, 2001 was $1,943,601 thousand.
114
T S M C A n n u a l R e p o r t 2 0 0 1
The net assets or liabilities that have been hedged by the above forward exchange contracts are as follows:
Accounts receivable
Accounts payable
Time deposits
b) Interest rate swaps
Amount
(Thousand)
US$518,984
US$169,664
US$707,416
TSMC has entered into interest rate swap contracts to hedge exposure to rising interest rates on its floating rate
long-term loans. These significant transactions are summarized as follows:
Contract Date
April 28, 1998
April 29, 1998
June 26, 1998
June 26, 1998
Period
May 21, 1998 to May 21, 2003
May 21, 1998 to May 21, 2003
June 26, 1998 to June 26, 2003
July 6, 1998 to July 6, 2003
Amount
(Thousand)
$2,000,000
1,000,000
1,000,000
1,000,000
Interest expenses on these transactions for the year ended December 31, 2001 were $473,413 thousand.
c) Option contracts
TSMC has entered into foreign currency option contracts to hedge risks of exchange rate fluctuations arising from
its anticipated U.S. dollar cash receipts from its export sales or Japanese Yen obligations related to its importation
of machinery and equipment.
Outstanding option contracts as of December 31, 2001 were as follows:
Contract
Currency
Contract
Amout
(Thousand)
Carrying
Value
(Thousand)
Fair Value
(Thousand)
Strike Price
Maturity
Put option sell
EUR
EUR293,000
($39,500)
($252,833)
0.8940-0.9340
Jan.-Feb., 2002
(EUR/US$)
For the year ended December 31, 2001, TSMC realized premium income of $328,254 thousand and premium
expense of $93,522 thousand.
2) Transaction risk
a) Credit risk: The banks, which are the counter-parties to the foregoing derivative financial instruments, are
reputable financial institutions. Management believes its exposures related to the potential default by those
counter parties are low.
b) Market price risk: All derivative financial instruments are intended as hedges for fluctuations in currency
exchange rates on the Company foreign currency denominated receivables or payables and interest rate
fluctuations on its floating rate long-term loans. Gains or losses from forward exchange contracts are likely to be
offset by gains or losses from receivables and payables. Interest rate risks are also controlled as the expected cost
of capital is fixed. Thus, market price risks from exchange rate and interest rate fluctuations are minimal.
T S M C A n n u a l R e p o r t 2 0 0 1
115
c) Liquidity and cash flow: The cash flow requirements on the derivative instruments are limited to the net
differences between the spot rates and contracted forward rates at settlement dates (for forward contracts); and
amounts payable arising from the differences in the rates (for interest rate swap contracts). Also, options may not
have to be exercised at all in cases where the strike price is higher than the related market price at exercise dates.
Management believes that the foregoing requirements are not material.
3) Fair value of financial instruments
Non-derivative financial instruments
Assets
Cash and cash equivalents
Short-term investments
Receivables from related parties
Notes and accounts receivable
Long-term investments
Refundable deposits
Pledged time deposits
Liabilities
Short-term bank loans
Payable to related parties
Accounts payable
December 31, 2001
December 31, 2000
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$37,556,295 $37,556,295
$38,840,217 $38,840,217
1,398,071
6,917,133
1,502,098
6,117,525
494,732
494,732
948,726
948,726
20,134,218
20,134,218
30,460,489
30,460,489
11,599,150
16,545,944
10,663,804
15,203,179
784,089
26,183
784,089
26,183
979,067
979,067
10,768
10,768
6,269,181
6,269,181
3,833,841
3,833,841
1,048,273
1,048,273
2,606,339
2,606,339
1,397,879
1,397,879
8,507,827
8,507,827
Payable to contractor and equipment suppliers
12,867,236
12,867,236
25,550,273
25,550,273
Long-term liabilities(including current portion)
22,402,445
22,402,445
23,393,738
23,393,738
Bonds (include current portion)
29,000,000
29,703,063
29,000,000
29,035,803
Guarantee deposits
7,212,688
7,212,688
7,086,379
7,086,379
Derivative financial instruments
Forward exchange contracts (buy)
Forward exchange contracts (sell)
Interest rate swaps
Option
-
-
2,820,220
2,887,126
28,031,119
27,603,894
20,802,311
20,788,804
26,969
(343,088)
1,601
234,017
(39,500)
(252,833)
-
(456,068)
Fair values of financial instruments were determined as follows:
a) Short-term financial instruments - carrying values.
b) Short-term investments - market values.
c) Long-term investments - market value for listed companies and net equity value for others.
d) Refundable deposits and guarantees deposits - carrying values.
e) Long-term liabilities - based on forecasted cash flows discounted at interest rates of similar long-term liabilities.
Bonds payable are discounted at present value. Fair values of other long-term liabilities are also their carrying
values as they use floating interest rates.
f) Derivative financial instruments - based on outright forward rates and interest rate in each contract.
The fair values of non-financial instruments were not included in the fair values disclosed above. Accordingly, the
sum of the fair values of the financial instruments listed above does not equal the fair value of the Company.
116
T S M C A n n u a l R e p o r t 2 0 0 1
20. SEGMENT FINANCIAL INFORMATION
a. Geographic information:
Overseas
Taiwan
Adjustments
and
Elimination
Consolidated
2001
Sales to unaffiliated customers
$-
$125,884,892
$-
$125,884,892
Transfers between geographic areas
8,152,070
3,111
(8,155,181)
-
Total sales
Gross profit
Operating expenses
Non-operating income
Non-operating expenses
Income before income tax
Minority interest gain
Identifiable assets
Long-term investments
Total assets
2000
$8,152,070
$125,888,003
($8,155,181)
$125,884,892
($1,224,832)
$36,381,055
($1,499,429)
$33,656,794
(20,878,997)
6,475,576
(8,466,868)
$10,786,505
($44,009)
$73,433,656
$303,954,097
($22,469,208)
$354,918,545
11,599,150
$366,517,695
Sales to unaffiliated customers
$-
$166,197,604
$-
$166,197,604
Transfers between geographic areas
14,451,231
30,816
(14,482,047)
-
Total sales
Gross profit
Operating expenses
Non-operating income
Non-operating expenses
Income before income tax
Minority interest gain
Identifiable assets
Long-term investments
Total assets
b. Gross export sales
Area
America
Asia
Europe
14,451,231
$166,228,420
($14,482,047)
$166,197,604
$3,970,099
$75,996,839
($1,379,004)
$78,587,934
(17,293,246)
6,119,803
(3,512,967)
$63,901,524
$36,786
$63,810,250
$320,273,323
($23,861,398)
$360,222,175
10,663,804
$370,885,979
2000
$81,655,987
42,906,968
11,360,517
$135,923,472
2001
$63,893,621
23,874,375
7,523,873
$95,291,869
The export sales information is presented by billed regions.
c Major customer
The customer with the sales amounted over 10% of the Company's total sales is as following:
Customer
A
2001
Amount
$21,789,769
%
17
2000
Amount
$10,307,244
%
6
T S M C A n n u a l R e p o r t 2 0 0 1
117
TABLE 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
FINANCING PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No.
Financing Counter-Party
Name
Financial
Statement
Account
Financing
Limit for
Each
Borrowing
Company
Maximum Balance
for the Period
(US$ in Thousand)
Ending Balance
(US$ in Thousand)
Interest
Rate
Financing
Reasons
Allowance
for Bad Debt
Collateral
Item Value
Transaction
Amount
1
2
TSMC-BVI
TSMC
Technology
Other
receivables
-
US$14,662
US$14,662
7.75%
VIS
VIS Holding
Prepaid
expenses
(Note 2)
$1,232
$-
-
$-
-
- $-
- -
$-
-
Operating
capital
Prepayments
for product
development
Note 1: Not exceeding the issued capital of the Company.
Note 2: Not exceeding 10% of the issued capital of VIS for each transaction entity, and also limited to 30% of the issued capital of each transaction entity.
Note 3: Not exceeding 20% of the issued capital of VIS.
Financing
Company's
Financing
Amount Limits
(US$ in Thousand)
US$779,968
(Note 1)
$4,400,000
(Note 3)
TABLE 2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
ENDORSEMENT/GUARANTEE PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No.
Endorsement/
Guarantee
Provider
Counter-Party
Name
Limits on Each
Counter-party's
Endorsement/
Guarantee Amounts
Maximum
Balance for
the Period
(US$ in Thousand)
Nature of
Relationship
(Note 2)
Ending Balance
Value of
Ratio of
(US$ in Thousand) Collateral Property, Accumulated Amount
Plant and
Equipment (Note 3)
of Collateral to Net
Equity of the Latest
Financial Statement
0
TSMC
TSMC Development Inc.
TSMC - North America
WAFERTECH, LLC
(Note 4)
3
2
3
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
$-
-
-
3.38%
0.51%
5.56%
Maximum
Collateral/Guarantee
Amounts Allowable
(Note 1)
$54,397,659
Note 1: 30% of the issued capital of the Company.
Note 2: The No. 2 represents a subsidiary in which TSMC holds directly over 50% of the equity interest.
The No. 3 represents an investee in which TSMC holds directly and indirectly over 50% of the equity interest.
Note 3:Promissory notes for collateral.
Note 4:Not exceeding 10% of the issued capital of the Company, and also limiting to the issued capital of the transaction entity, unless otherwise approved by Board of directors.
118
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 3
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELD
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Marketable Securities
Type and Name
Relationship
with the
Company
Financial Statement
Account
Shares
(Thousand)
December 31, 2001
Note
Carrying
Value(US$
in Thousand)
Percentage
of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: TSMC
Stock
TSMC - North America
TSMC - Europe
TSMC - Japan
VIS
TSMC-BVI
TSMC Partners
SSMC
Emerging Alliance Fund
Taiwan Mask Corp.
United Technology Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Hon Tung Ventures Capital
Amkor Technology
Certificate
Po Cherng Investment
Chi Hsin Investment
Kung Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Cherng Huei Investment
Equity
Crimson Asia Capital Fund
Horizon Ventures Fund
Held Company Name: Chi Cherng Investment
Stock
TSMC
(Forward)
Long-term investment
11,000
$786,062
Subsidiary
Subsidiary
Subsidiary
Investee
Subsidiary
Subsidiary
Investee
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Subsidiary
Long-term investment
-
-
-
-
-
-
Investee
Investee
Investee
Investee
Investee
Investee
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
-
6
556,133
779,968
300
301
-
7,782
16,783
10,500
5,000
15,000
505
-
-
-
-
-
-
-
-
10,147
80,156
3,377,526
19,987,814
3,032,376
2,907,967
741,617
32,129
193,584
105,000
50,000
150,000
280,748
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
100
100
100
25
100
100
32
99
2
11
7
2
10
-
25
25
25
25
25
25
N/A
N/A
$786,062
10,147
80,156
6,584,620
19,987,814
3,032,376
2,907,967
741,617
183,658
274,107
118,726
64,855
139,086
287,610
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
Major shareholder
Short-term investment
3,023
98,282
-
253,173
T S M C A n n u a l R e p o r t 2 0 0 1
119
Marketable Securities
Type and Name
Relationship
with the
Company
Financial Statement
Account
Shares
(Thousand)
December 31, 2001
Carrying
Value(US$
in Thousand)
Percentage
of
Ownership
Note
Market Value
or Net Asset
Value (US$ in
Thousand)
Held Company Name: Chi Cherng Investment
Certificate
Po Cherng Investment
Chi Hsin Investment
Hsin Ruey Investment
Kung Cherng Investment
Cherng Huei Investment
Held Company Name: Kung Cherng Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Cherng Huei Investment
Held Company Name: Po Cherng Investment
Stock
TSMC
Certificate
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Kung Cherng Investment
Cherng Huei Investment
Held Company Name: Cherng Huei Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Kung Cherng Investment
Held Company Name: Chi Hsin Investment
Stock
TSMC
(Forward)
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
6,000
6,000
6,000
6,000
6,000
$98,834
94,951
94,411
106,687
99,983
Major shareholder
Short-term investment
6,758
226,819
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
99,983
15
15
15
15
15
-
15
15
15
15
15
$98,834
94,951
94,411
106,687
99,983
565,937
98,834
94,951
94,017
94,411
99,983
Major shareholder
Short-term investment
4,240
187,508
-
355,058
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
6,000
6,000
6,000
6,000
6,000
94,951
94,017
94,411
106,687
99,983
15
15
15
15
15
94,951
94,017
94,411
106,687
99,983
Major shareholder
Short-term investment
4,917
198,896
-
411,724
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
106,687
15
15
15
15
15
98,834
94,951
94,017
94,411
106,687
Major shareholder
Short-term investment
3,561
138,747
-
298,220
Pledge
150
thou-
sand
shares
Pledge
1,600
thou-
sand
shares
120
T S M C A n n u a l R e p o r t 2 0 0 1
Marketable Securities
Type and Name
Relationship
with the
Company
Financia Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying
Value(US$
in Thousand)
Percentage
of
Ownership
Market Value
or Net Asset
Value (US$ in
Thousand)
Held Company Name: Chi Hsin Investment
Certificate
Po Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Kung Cherng Investment
Cherng Huei Investment
Held Company Name: Hsin Ruey Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Kung Cherng Investment
Cherng Huei Investment
Held Company Name: TSMC-BVI
Stock
InveStar Semiconductor
Development Fund Inc.
InveStar Semiconductor
Development Fund (II) Inc.
TSMC Development Inc.
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Major shareholder
Short-term investment
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Major shareholder
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
6,000
6,000
6,000
6,000
6,000
1,407
6,000
6,000
6,000
6,000
6,000
$98,834
94,017
94,411
106,687
99,983
98,996
98,834
94,951
94,017
106,687
99,983
Subsidiary of TSMC-BVI
Long-term investment
45,000
US$65,203
Subsidiary of TSMC-BVI
Long-term investment
45,000
US$45,766
15
15
15
15
15
-
15
15
15
15
15
97
97
$98,834
94,017
94,411
106,687
99,983
117,836
98,834
94,951
94,017
106,687
99,983
US$65,203
US$45,766
Subsidiary of TSMC-BVI
Long-term investment
and its chairman is also
TSMC's chairman
1
1
US$201,231
100
US$201,231
US$1,591
100
US$1,591
TSMC Technology Inc.
Subsidiary of TSMC-BVI
Long-term investment
and its chairman is also
TSMC's chairman
3DFX Interactive Inc.
Held Company Name: VIS
Bond fund
Qiung Ban
Yuan Da Duo Li #2
THE TP ROC
Stock
VIS Associates Inc.
PowerChip Semiconductor Inc.
Etron Technology Inc.
Walsin Technology Inc.
MEGIC Corporation
Form Factor, Inc.
United Technology Co., Ltd.
(Forward)
-
-
-
-
Subsidiary
Investee
Investee
Investee
Investee
Investee
Investee
Long-term investment
68
US$297
Short-term investment
Short-term investment
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
28,409
26,278
25,923
41,070
202,185
5,617
34,551
16,500
267
3,357
400,000
350,000
350,000
902,999
2,651,216
275,766
414,481
177,000
64,360
38,716
-
-
-
-
100
9
3
10
9
1
2
US$30
401,960
352,465
355,763
902,999
3,263,269
281,864
358,994
188,581
64,360
54,872
T S M C A n n u a l R e p o r t 2 0 0 1
121
Marketable Securities
Type and Name
Relationship
with the
Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying
Value
(US$ in
Thousand)
Percentage
of Ownership
Market
Value or
Net Asset
Value (US$ in
Thousand)
Held Company Name: VIS Associates Inc.
Stock
VIS Investment Holding, Inc.
Subsidiary of
Long-term investment
68
US$891
100
US$891
VIS Associates Inc
-
-
-
-
Long-term investment
Long-term investment
Short-term investment
-
-
US$7,894
US$5,705
23,168
US$10,047
35
14
-
US$7,894
US$5,705
US$11,339
Long-term investment
-
US$2,800
100
US$2,800
Investee
Long-term investment
200
US$258
100
US$258
Investee of TSMC
Long-term investment
-
US$226,541
99
US$226,541
Development and its
chairman is also
chairman of TSMC
Equity
Silicon Valley Equity Fund
Silicon Valley Equity Fund II
ABN AMRO Bank Equity
Certificate
Fund
Grand Palace Trust
Held Company Name: VIS Investment Holding, Inc.
Stoc
VIS Micro, Inc.
Held Company Name: TSMC Development
Stock
WaferTech, LLC
Held Company Name: TSMC Partners
ADR
TSMC
Parent Company
Short-term investment
495
US$7,357
Held Company Name: InveStar Semiconductor Development Fund Inc.
Stock
Silicon Image, Inc.
Marvell Technology Group Ltd.
Silicon Labo Ratories
Chang Yi Technology
Divio
Capella Microsystems, Inc.
Equator Technologies, Inc.
Empower Tel Networks, Inc.
Ubicom, Inc.
Global Test Corp.
Chip Strate
Ritch Tech
APE Fu Ding Technology
(Forward)
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term investment
Short-term investment
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
297
3,413
15
1,668
30
542
133
317
861
13,268
6,660
1,023
2,750
US$520
US$3,350
US$472
US$1,643
US$3
US$135
US$90
US$344
US$172
US$5,672
US$2,142
US$326
US$1,518
122
T S M C A n n u a l R e p o r t 2 0 0 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$8,726
US$1,236
US$123,797
US$519
US$672
US$3
US$135
US$90
US$344
US$172
US$10,126
US$2,073
US$1,743
US$1,336
Marketable Securities
Type and Name
Relationship
with the
Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying
Value
(US$ in
Thousand)
Percentage
of Ownership
Market
Value or
Net Asset
Value (US$ in
Thousand)
Held Company Name: InveStar Semiconductor Development Fund Inc.
Preferred stock
Integrated Memory Logic, Inc.
Divio (Next wave)
SIRF Technology Inc.
Rise
Capella Microsystems, Inc.
Sensory, Inc.
Equator Technologies, Inc.
Light Speed Semiconductor Corporation
Empower Tel Networks, Inc.
Ubicom, Inc.
RapidStream
Tropian, Inc.
Sonics, Inc.
Pico Turbo, Inc.
Atheros, Inc.
NanoAmp Solutions, Inc.
Formfactor, Inc.
Monolithic Power Systems, Inc.
Memsic, Inc.
Reflectivity, Inc.
Signia
Match Lab, Inc.
HINT Corporation
Creosys, Inc.
Incentia Design Systems, Inc.
Bond
Rise
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held Company Name: InveStar SemiconductorDevelopment Fund (II) Inc.
Stock
HPL Aquisition Corporation
Richtek Technology Corporation
Chang Yi Technology
Preferred stock
Procoat Technology
Omega Band, Inc.
Memsic, Inc.
OEpic, Inc.
Equator Technologies, Inc.
NanoAmp Solutions, Inc.
RapidStream, Inc.
Signia Technologies, Inc.
(Forward)
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
1,831
US$1,809
667
306
600
1,383
1,404
443
2,252
3,840
1,056
2,056
1,758
3,082
1,050
1,607
541
267
2,521
2,727
1,064
3,000
1,875
1,000
1,500
286
US$500
US$1,333
US$1,500
US$1,298
US$1,250
US$1,338
US$3,064
US$5,128
US$1,361
US$1,050
US$2,334
US$3,082
US$1,250
US$3,593
US$853
US$2,000
US$2,000
US$1,500
US$2,000
US$1,500
US$1,500
US$1,000
US$1,500
US$500
Long-term investment
-
US$300
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
187
480
487
2,500
1,389
2,289
2,696
770
250
246
500
US$1,124
US$1,001
US$139
US$869
US$1,250
US$1,560
US$2,500
US$1,501
US$1,000
US$1,057
US$750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$3,055
US$2,233
US$1,858
US$1,500
US$1,660
US$857
US$864
US$764
US$14,296
US$2,433
US$7,286
US$2,388
US$3,082
US$1,300
US$9,025
US$1,900
US$3,600
US$4,938
US$2,894
US$2,000
US$3,900
US$1,500
US$1,000
US$1,500
US$500
US$300
US$2,669
US$987
US$139
US$857
US$1,250
US$2,489
US$3,023
US$1,501
US$1,000
US$1,057
US$750
T S M C A n n u a l R e p o r t 2 0 0 1
123
Marketable Securities
Type and Name
Relationship
with the
Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying
Value
(US$ in
Thousand)
Percentage
of Ownership
Market
Value or
Net Asset
Value (US$ in
Thousand)
Held Company Name: InveStar Semiconductor
Advanced Analogic Technology, Inc.
Held Company Name: Development Fund (II) Inc.
Y-MEDIA Corporation
Monlithic Power Systems, Inc.
Ralink Technology, Inc.
Sonics, Inc.
Newport Opticom, Inc.
Silicon Data, Inc.
Capella Microsystems, Inc.
Angstron Systems, Inc.
Tropain, Inc.
SIRF Technology, Inc.
Match Lab, Inc.
OEpic, Inc.
Bond
Omega Band, Inc.
Pico Turbo, Inc.
Held Company Name: Emerging Alliance Fund
Stock
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
948
US$1,261
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
281
674
1,833
3,082
1,157
500
800
1,567
1,464
20
313
-
N/A
N/A
US$1,500
US$1,515
US$1,500
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
Global Investment Holding Inc.
Investee
Long-term investment
10,000
$100,000
Preferred stock
Quake Technologies, Inc.
Pixim, Inc.
Newport Opticom, Inc.
NetLogic Microsystems, Inc.
Quickilver Technology, Inc.
Ikanos Communication, Inc.
Litchfield Communications
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
467
833
962
602
3,320
1,741
3,799
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
1
3
6
1
29
3
6
US$1,261
US$1,500
US$1,515
US$1,767
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
$100,000
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
124
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST
NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Marketable Securities
Type and Name
Financial Statement
Account
Counter
-Party
Nature
of
Relationship
Company Name: TSMC
Stock
Beginning Balance
Acquisition
Disposal
Ending Balance
Shares
(Thousand)
Amount
Shares
(T h o u s a n d )
Amount
(US$ in
T h o u s a n d )
Shares
(T h o u s a n d )
Amount
(US$ in
T h o u s a n d )
Carrying Gain (Loss)
Value
on Disposal ( T h o u s a n d )
Shares
Amount
(US$ in
T h o u s a n d )
(Note 1)
Emerging Alliance Fund
Long-term investment
Emerging Alliance
Systems on Silicon Manufacturing
Long-term investment
Fund SSMC
Subsidiary
Investee
-
90
$-
-
$837,045
935,870
211 3,553,862
-
-
$-
-
$-
-
$-
-
- $741,617
3012,907,967
Company (SSMC)
Taiwan Semiconductor Technology
Long-term investment
Amkor Technology
Amkor Technology
Long-term investment
Amkor Technology
-
-
Company Name: Emerging Alliance Fund
Stock
Global Investment Holding, Inc.
Long-term investment
Global Investment
Investee
Convertible Commercial Paper
VM Labs, Inc.
Long-term investment
Holding, Inc.
VM Labs, Inc.
-
50,000
500,000
-
-
50,000
-
-
-
-
-
-
505
280,748
10,000
100,000
- US$4,000
Long-term investment
Subsidiary
23,750
464,077
17,500
597,783
395,748
(Note 2)
-
-
500,000 (104,252)
-
-
-
-
-
-
505
280,748
10,000
100,000
US$1,000
US$4,000(US$3,000)
-
-
-
-
-
41,070
902,999
-
-
-
-
Company Name: VIS
Stock
VIS Associates Inc.
Bond Fund
Qiung Ban
THE TP ROC
Yuan Da Duo Li #2
NITC
FUBON JU-I
Capital Save Income
Home Run
Short-term investment
Short-term investment
Short-term investment
Short-term investment
Short-term investment
Short-term investment
Short-term investment
Company Name: VIS Associates Inc.
ABN AMRO Bank Equity Certificates
Short-term investment
Company Name: InveStar Semiconductor Development Fund Inc.
Stocks
Centillium Tec. Corp
Short-term investment
Marvell Technology Group Ltd.
Short-term investment
Preferred Stocks
Lara Networks, Inc.
Short-term investment
Company Name: InveStar Semiconductor Development Fund (II) Inc.
Sonic, Inc.
Long-term investment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,548
40,874
49,017
500,000
550,000
650,000
2,048
300,000
31,397
15,295
51,811
450,000
200,000
650,000
7,139
14,951
22,739
2,048
31,397
15,295
51,811
100,263
201,482
302,698
302,386
452,789
201,139
656,159
100,000
200,000
300,000
300,000
450,000
200,000
650,000
263
1,482
2,698
2,386
2,789
1,139
6,159
28,409
400,000
25,923
350,000
26,278
350,000
-
-
-
-
-
-
-
-
23,168 US$10,047
-
-
-
-
23,168US$10,047
165
US$660
4,665
US$4,579
1,544
US$772
-
-
-
-
-
-
165
US$7,474
US$660 US$6,814
-
-
1,252 US$38,094
US$1,229 US$36,865
3,413 US$3,350
1,544
US$8,170
US$772 US$7,398
-
-
-
-
3,082 US$3,082
-
-
-
-
3,082 US$3,082
Note 1: The ending balance included the recognition of the investment income (loss) by the equity method and the accumulated translation adjustment.
Note 2: Disposal price included $115,000 in cash and the agreed exchange 505 thousand shares of Amkor Technology. The market value for the shares of Amkor Technology on the disposal day worth $280,748.
T S M C A n n u a l R e p o r t 2 0 0 1
125
TABLE 5
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Company Name
Property
Transaction
Date
Transaction
Amount
Payment Term Counter-Party
Nature of
Relationship
Prior Transaction of Related Counter-party
Price Reference
Owner
Relationship
Transfer Date Amount
Purpose of
Acquisition
Other Terms
TSMC
Fab 12
and office
Jan. 10, 2001
$345,000
Depend on the
progress of the
construction
China
Construction
Co, Ltd.
Jan. 29, 2001
476,200
Fu Tsu
Depend on the
progress of the Construction
construction
Co, Ltd
-
-
N/A
N/A
N/A
N/A
Public bidding
N/A
N/A
N/A
N/A
Public bidding
Manufacturing
purpose
Manufacturing
purpose
None
None
TABLE 6
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST
NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Transaction Details Abnormal Transaction Note/Accounts Payable or Receivable
Related Party
Nature of Relationship
Transaction Details
Abnormal Transaction Note/Accounts Payable or Receivable
Note
Purchase/Sale Amount
% to Total
(Note 1)
Payment Terms
Unit Price
Payment Terms
Ending Balance
% to Total
Company Name: TSMC
Phillips and its
affiliates
VIS
ITRI
WAFERTECH, LLC
Major shareholder
Sales
$2,389,257
Investee
Sales
1,177,094
The company's chairman
is one of its directors
Indirect investee of the
subsidiary (TSMC-BVI)
Sales
114,546
Purchase
6,797,817
VIS
Investee
Purchase
3,801,975
2
1
-
37
22
Net 30 days
from invoice date
Net 45 days from
monthly closing date
Net 45 days from
monthly closing date
Net 30 days from
monthly closing date
Net 45 days from
monthly closing date
None
None
$116,499
None
None
320,179
None
None
37,383
None
None
(817,616)
None
None
(548,472)
22
61
7
39
26
Note 1: Percentage for sales is of gross sales and percentage for purchases is of the total purchases of material and finished goods.
126
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 7
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Related Party
Nature of Relationship
Ending Balance
Turnover Rate
Overdue
Amounts Received
Allowance for
Amount
Action Taken
in Subsequent Period
Bad Debts
Company Name: TSMC
VIS
Investee
Phillips and its affiliates
Major shareholder
$320,179
116,499
N/A
$52,668
Accelerate demand on account receivables
58 days
20,820
Accelerate demand on account receivables
$92,345
80,559
-
-
TABLE 8
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Investee Company
Location
Main Businesses
and Products
Original Investment Amount
Balance as of December 31, 2001
Dec. 31, 2001
Dec. 31, 2000
Shares
Percentage of
Carrying Value
Net Income (Loss)
of the Investee
Investment
Gain (Loss)
Note
(Thousand) Ownership
Investor Company: TSMC
TSMC - North America
San Jose,
California, U.S.A
Marketing and
engineering support
TSMC - Europe
Amsterdam,
The Netherlands
Marketing and
engineering support
TSMC - Japan
Yokohama, Japan
VIS
Hsin-Chu, Taiwan
Marketing and
engineering support
IC Design and
manufacturing
$333,718
$333,718
11,000
100
$786,062
$4,560
$4,560
Subsidiary
2,960
2,960
83,760
35,142
-
6
100
100
10,147
420
420
Subsidiary
80,156
(183)
(183)
Subsidiary
6,503,640
6,503,640
556,133
25
3,377,526
(8,692,423)
(2,236,940)
Investee
TSMC - BVI
Tortola,
British Virgin Islands
Investment
24,165,780
24,159,958
779,968
100
19,987,814
(4,855,844)
(4,855,844)
Subsidiary
Po Cherng Investment
Taipei, Taiwan
Investment
Chi Hsin Investment
Taipei, Taiwan
Investment
Kung Cherng Investment
Taipei, Taiwan
Investment
Chi Cherng Investment
Taipei, Taiwan
Investment
Hsin Ruey Investment
Taipei, Taiwan
Investment
Cherng Huei Investment
Taipei, Taiwan
Investment
TSMC Partners
Tortola,
British Virgin Islands
Investment
100,000
100,000
100,000
100,000
100,000
100,000
10,350
100,000
100,000
100,000
100,000
100,000
100,000
10,350
-
-
-
-
-
-
25
25
25
25
25
25
164,724
158,252
177,812
156,694
157,352
166,639
110,960
27,740
Investee
77,008
76,241
103,603
117,006
113,755
19,252
Investee
19,060
Investee
25,901
Investee
29,251
Investee
28,439
Investee
300
100
3,032,377
2,357,405
2,357,405
Subsidiary
SSMC
Singapore
Manufacturing
the wafer
4,986,344
1,432,482
Emerging Alliance Fund
Cayman Islands
Investment
837,045
-
301
-
32
99
2,907,967
(5,381,499)
(1,722,080)
Investee
741,617
(127,249)
(126,612)
Subsidiary
T S M C A n n u a l R e p o r t 2 0 0 1
127
11. Financial Forecast and Operation Results from 2000 to 20001
Year 2001
Unit: NT$K
Item
2001 Financial Forecast
2001 Financial Statement
2001 Financial
(Reviewed by CPA)
(Audited by CPA)
Forecast*
Original
First Revised
Second Revised
Amount
Complete %
Net Sales
Cost of Sales
Gross Profit
149,038,964 121,893,177
125,562,194 125,888,003
101,052,405
88,276,165
88,990,120
89,506,952
47,986,559
33,617,012
36,572,074
36,381,051
100.26%
100.58%
99.48%
None
Operating Expenses
18,610,914
19,336,062
18,909,731
19,038,765
100.68%
Income from Operations
29,375,645
14,280,950
17,662,343
17,342,286
98.19%
Non - Operating Income
1,560,592
2,476,136
2,691,210
2,891,557
107.44%
Non - Operating Expenses
8,744,087
10,716,002
11,000,597
9,575,128
Income before Income Tax
22,192,150
6,041,084
9,352,956
10,658,715
Net Income
25,737,275
10,988,558
13,203,313
14,483,174
87.04%
113.96%
109.69%
*Reasons for penalty charged by TSE, OTC and SFC, if any.
Year 2000
Unit: NT$K
Item
2000 Financial Forecast
2000 Financial Statement
2000 Financial
(Reviewed by CPA)
(Audited by CPA)
Forecast*
Original
Amount
Complete %
Net Sales
Cost of Sales
Gross Profit
Operating Expenses
Income from Operations
Non - Operating Income
Non - Operating Expenses
Income before Income Tax
Net Income
164,868,568
166,228,420
93,196,686
71,671,882
13,473,921
58,197,961
6,837,681
2,155,271
62,880,371
64,002,300
92,303,675
73,924,745
13,383,640
60,541,105
5,409,307
2,112,818
63,837,594
65,106,194
*Reasons for penalty charged by TSE, OTC and SFC , if any.
100.82%
99.04%
103.14%
99.33%
104.03%
79.11%
98.03%
101.52%
101.72%
None
128
T S M C A n n u a l R e p o r t 2 0 0 1
SPECIFIC NOTES
1. Affiliates Information
(1) TSMC Affiliated Companies Chart
Unit: Shares, %
Taiwan Semiconductor Manufacturing Company, Ltd.
TSMC, North America
TSMC, Europe B.V.
TSMC, Japan K.K.
Shareholding: 100%
Shareholding: 100%
Shareholding: 100%
TSMC International
Investment Ltd.
Shareholding: 100%
TSMC Partners, Ltd.
Shareholding: 100%
Emerging Alliance
Fund
Shareholding: 99%
TSMC
Development, Inc.
Shareholding: 100%
TSMC
Technology, Inc.
Shareholding: 100%
InveStar Semiconductor
Development Fund (1)
Shareholding: 97%
InveStar
Semiconductor
Development Fund (2)
Shareholding: 97%
WaferTech, LLC
Shareholding: 99%
Vanguard Int'l
Semiconductor Corp.
Shareholding: 25%
Vanguard
Association Inc.
Shareholding: 100%
VIS Investment
Holding
Shareholding: 100%
Kung Cherng
Investment Co., Ltd.
Shareholding: 25%
Po Cherng: 15%
Chi Cherng: 15%
Chi Hsin: 15%
Cherng Huei: 15%
Hsin Ruey: 15%
Chi Cherng
Investment Co., Ltd.
Shareholding: 25%
Po Cherng: 15%
Kung Cherng: 15%
Chi Hsin: 15%
Cherng Huei: 15%
Hsin Ruey: 15%
Chi Hsin
Investment Co., Ltd.
Shareholding: 25%
Po Cherng: 15%
Kung Cherng: 15%
Chi Cherng: 15%
Cherng Huei: 15%
Hsin Ruey: 15%
Po Cherng
Investment Co., Ltd.
Shareholding: 25%
Kung Cherng: 15%
Chi Cherng: 15%
Chi Hsin: 15%
Cherng Huei: 15%
Hsin Ruey: 15%
Cherng Huei
Investment Co., Ltd.
Shareholding: 25%
Po Cherng: 15%
Kung Cherng: 15%
Chi Hsin: 15%
Chi Cherng: 15%
Hsin Ruey: 15%
Hsin Ruey
Investment Co., Ltd.
Shareholding: 25%
Po Cherng: 15%
Kung Cherng: 15%
Chi Hsin: 15%
Chi Cherng: 15%
Cherng Huei: 15%
T S M C A n n u a l R e p o r t 2 0 0 1
129
(2) TSMC Affiliated Companies
December 31, 2001
Company
Date of Incorporation
Place of Registration
Paid-in Capital
Business Activities
Unit : NT(US, NLG, JPY) $K
TSMC, North America
Jan. 18, 1988
San Jose, California, USA
US$11,000
TSMC, Europe B.V.
Mar. 4, 1994
Amsterdam, The Netherlands
NLG 200
TSMC, Japan K.K.
Sep. 10, 1997
Yokohama, Japan
JPY 300,000
Marketing &
Engineering support
Marketing &
Engineering support
Marketing &
Engineering support
TSMC Int'l Investment Ltd.
Apr. 9, 1996
Tortola, British Virgin Islands
US$779,968
Investment
TSMC Partners, Ltd.
Mar. 26, 1998
Tortola, British Virgin Islands
US$300
Investment
TSMC Development, Inc.
Feb. 16, 1996
Delaware, USA
US$734,583
Investment
TSMC Technology, Inc.
Feb. 20, 1996
Delaware, USA
US$0.001
Investment
InveStar Semiconductor
DevelopmentFund Inc.
InveStar Semiconductor
Development Fund (II) Inc.
Emerging Alliance Fund
Wafertech, LLC
Sep. 10, 1996
Cayman Islands
US$46,350
Investment
Aug. 25, 2000
Cayman Islands
US$46,350
Investment
Jan. 1, 2001
Jun. 3, 1996
Cayman Islands
US$25,050
Investment
Washington, USA
US$769,927
Wafer Manufacturing
Po Cherng Investment Co., Ltd.
Jul. 6, 1998
Chi Hsin Investment Co., Ltd.
Jul. 6, 1998
Cherng Huei Investment Co., Ltd.
Jul. 10, 1998
Hsin Ruey Investment Co., Ltd.
Jul. 13, 1998
Kung Cherng Investment Co., Ltd.
Jul. 14, 1998
Chi Cherng Investment Co., Ltd.
Jul. 15, 1998
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
Taipei, Taiwan
NT$400,000
Investment
NT$400,000
Investment
NT$400,000
Investment
NT$400,000
Investment
NT$400,000
Investment
NT$400,000
Investment
Vanguard Int'l Semiconductor Corp.
Dec. 5, 1994
Hsin-Chu, Taiwan
NT$22,000,000
IC Design &
Manufacturing
VIS Associates Inc.
Sep. 24, 1996
Tortola, British Virgin Islands
US$41,070
IC Related Investment
VIS Investment Holding, Inc.
Nov. 16, 1996
Delaware, USA
US$6,750
IC Related Investment
Note: Foreign exchange rate on the reporting date is shown below:
US$1 = NT$34.999 NLG1 = NT$14.08 JPY1 = NT$0.2667
130
T S M C A n n u a l R e p o r t 2 0 0 1
(3) Business Scope of TSMC and its Affiliated Companies
TSMC and its affiliates work together to provide dedicated foudry services to our customers around the world. In
addition, few of TSMC's affiliate companies are focused on conducting investment business. In general, TSMC and its
affiliates give each other support in technology, capacity, marketing and services with an aim to create the maximum
synergy, enabling TSMC to provide our worldwide customers with the best dedicated foundry services worldwide.
The ultimate goal of this strategy is to ensure TSMC's leading position in the global IC market.
(4) TSMC Shareholders Representing Both Holding Companies and Subordinates
December 31, 2001
Reasoning
Name
Shareholding (Note 2)
Date of Incorporation
Place of Registration
Paid-in Capital
Business Activities
Unit: NT$K, except Shareholding
(Note 1)
Shares
Holding %
None
The presumed interested parties representing both holding companies and subordinates include the company's Director, the shareholders
conducting business on behavior of the company, and the shareholders holding more than 50% shares of the company.
Note 1: The same legal and natural persons apply a company name and a personal name, respectively.
Note 2: It shows the shareholdings to the holding company (excluding the holdings to the subordinates).
T S M C A n n u a l R e p o r t 2 0 0 1
131
(5) Rosters of Directors, Supervisors, and Presidents of TSMC's Affiliated Companies
December 31, 2001
Company
Title
Name
TSMC, North America
TSMC, Europe B. V.
Director
Director
F.C. Tseng
Rick Tsai
President
Edward C. Ross
Director
Director
Director
Director
Morris Chang
Rick Tsai
Quincy Lin
Hans Richard Rohrer
President
Hans Richard Rohrer
TSMC, Japan K.K.
Chairman
Sachiaki Nagae
Director
Director
Director
Director
Morris Chang
F.C. Tseng
Rick Tsai
Makoto Onodera
Supervisor
Harvey Chang
TSMC International Investment Ltd.
Director
Morris Chang
President
F.C. Tseng
Shareholding
Amount
-
-
Unit : NT$, except shareholding
%
-
-
(TSMC holds 11,000,000 shares)
(100%)
-
-
-
-
-
-
-
-
-
-
(TSMC holds 200 shares)
(100%)
-
-
-
-
-
(TSMC holds 6,000 shares)
-
-
(TSMC holds 779,968,244shares)
-
-
-
-
-
-
(TSMC holds 300,000 shares)
-
-
-
-
-
-
-
(100%)
-
-
(100%)
-
-
-
-
-
-
(100%)
-
-
(TSMC International Investment Ltd. Holds 734,583,200,000 shares)
(100%)
-
-
(TSMC International Investment Ltd. Holds 1,000shares)
Director
Director
Director
Director
Director
Director
Chairman
President
Chairman
President
F.C. Tseng
Rick Tsai
Quincy Lin
Steve Tso
Richard L. Thurston
Harvey Chang
Morris Chang
Morris Chang
Morris Chang
Morris Chang
TSMC Partners, Ltd.
TSMC Development, Inc.
TSMC Technology, Inc.
InveStar Semiconductor
Development Fund Inc.
InveStar Semiconductor
Development Fund Inc. (II) LDC
Emerging Alliance Fund
WaferTech, LLC
Director
Kenneth Tai
-
Director
Kenneth Tai
375,000 Shares
(TSMC International Investment Ltd. holds 45,000,000 shares)
NIL
Director
Director
Director
President
NIL
Morris Chang
Rick Tsai
Steve Tso
Steve Tso
(TSMC International Investment Ltd. holds 45,000,000 shares)
TSMC's Investment US$24,925,000)
Common Share 328,125
-
-
-
-
-
(100%)
-
(97%)
(0.8%)
(97%)
(99.5%)
0.13%
-
-
-
(Forward)
132
T S M C A n n u a l R e p o r t 2 0 0 1
(TSMC Development, Inc. holds 253,901,734 Preferred Shares)
(99.8%)
Unit : NT$, except shareholding
Company
Title
Name
Shareholding
Amount
Po Cherng Investment Co., Ltd.
Director
Quincy Lin (Representative of Chi Hsin Investment Co., Ltd.)
(Chi Hsin's investment NT$60,000,000)
Chi Hsin Investment Co., Ltd.
Director
Harvey Chang (Representative of Po Cherng Investment Co., Ltd.)
(Po Cherng's investment NT$60,000,040)
(TSMC's investment NT$ 99,999,960)
(TSMC's investment NT$99,999,960)
Cherng Huei Investment Co., Ltd. Director
Rick Tsai (Representative of Hsin Ruey Investment Co., Ltd.)
(Hsin Ruey's investment NT$60,000,040)
(TSMC's investment NT$99,999,960)
Hsin Ruey Investment Co., Ltd.
Director
Rick Tsai (Representative of Cherng Huei Investment Co., Ltd.)
(Cherng Huei's investment NT$ 60,000,000)
(TSMC's investment NT$99,999,960)
Kung Cherng Investment Co., Ltd. Director
F.C.Tseng (Representative of Chi Cherng Investment Co., Ltd)
(Chi Cherng's investment NT$ 60,000,040)
(TSMC's investment NT$99,999,960)
Chi Cherng Investment Co., Ltd
Director
F.C.Tseng (Representative of Kung Cherng Investment Co., Ltd.)
(Kung Cherng's investment NT$ 60,000,000)
Vanguard International
Semiconductor Corporation
Chairman
Morris Chang
(TSMC's investment NT$99,999,960)
3,240,448 shares
%
(15%)
(25%)
(15%)
(25%)
(15%)
(25%)
(15%)
(25%)
(15%)
(25%)
(15%)
(25%)
0.15%
Director
Director
Director
Director
Director
Director
Director
Director
Director
Liu, Bor-Hong
(Representative of The Development Fund, Executive Yuan, R.O.C.)
Liou, Ming-Jong
(Representative of The Development Fund, Executive Yuan, R.O.C.
Shih, Chin-Tay
(Representative of The Development Fund, Executive Yuan, R.O.C.)
Rick Tsai (Representative of TSMC)
F.C.Tseng (Representative of TSMC)
Paul Chien (Representative of TSMC)
Robert Hsieh (Representative of TSMC)
(The Development Fund holds 639,713,750 shares)
(29.08%)
(TSMC holds 556,133,496 shares)
(25.28%)
Wu, Quintin Y.G. (Representative of USI Far East Corp.)
(USI Far East Corp. holds 150,178,533 shares)
Chiao, Yu-Heng (Representative of Walsin Lihwa Corp.)
(Walsin Lihwa Corp. holds 53,827,741 shares)
Supervisor
Yeh, Huey-Ching
(Representative of The Development Fund, Executive Yuan, R.O.C.)
Supervisor
Harvey Chang (Representative of TSMC)
Supervisor
Chow, Sidney H. (Representative of Maw Chong Investment Co.,Ltd.)
(Maw Chong Investment Co.,Ltd. holds 38,392,356 shares)
President
Paul Chien
2,478,229 shares
(6.83%)
(2.45%)
(1.75%)
0.11%
VIS Associates Inc.
Director
Director
Director
Morris Chang (Representative of VIS)
Robert Hsieh (Representative of VIS)
Paul Chien (Representative of VIS)
VIS Investment Holding, Inc.
Director
Morris Chang (Representative of VIS Associates Inc.)
Director
Director
Robert Hsieh (Representative of VIS Associates Inc.)
Paul Chien (Representative of VIS Associates Inc.)
(VIS holds 41,070,000 shares)
(100%)
(VIS Associates Inc. holds 6,750,000 shares)
(100%)
T S M C A n n u a l R e p o r t 2 0 0 1
133
(6) Operational Highlights for TSMC Affiliated Companies
December 31, 2001
Company
Paid-in Capital
Assets
Liabilities
Net Worth
Net Sales*
TSMC, North America
384,989
1,887,121
960,342
926,779
1,145,285
TSMC, Europe B.V.
TSMC, Japan K.K.
2,816
80,010
65,280
93,273
55,133
13,117
10,147
125,654
80,156
200,133
Unit: NT$K, except EPS ($)
Income Net Income*
(net of tax)
from
Operation*
EPS*
(net of tax)
34,330
11,700
9,530
4,561
420
0.41
N.A.
(183)
(30.57)
TSMC Int'l Investment Ltd.
27,298,109
21,673,328
11,345,238
10,328,090
(2,369,743)
(4,302,390)
(2,923,831)
(6.38)
TSMC Partners, Ltd.
10,500
13,363,198
10,330,821
3,032,377
TSMC Development, Inc.
25,709,677
16,411,548
9,368,658
7,042,890
-
-
(13,021)
1,928,783
642,928
(4,220)
(3,975,344)
TSMC Technology, Inc.
0.035
256,444
547,005
(290,561)
1,404,261
92,540
58,435
N.A.
N.A.
InveStar Semiconductor
Development Fund Inc.
InveStar Semiconductor
Development Fund(II) Inc.
1,622,204
2,482,957
132,441
2,350,516
1,924,964
1,504,419
1,508,582
32.55
1,622,204
1,652,409
2,593
1,649,816
97,998
24,227
24,227
0.52
Wafertech, LLC
26,946,683
28,378,704
20,818,792
7,559,912
6,650,318
(2,009,756)
(2,607,717)
Po Cherng Investment Co., Ltd.
Chi Hsin Investment Co., Ltd.
Cherng Huei Investment Co., Ltd.
Hsin Ruey Investment Co., Ltd.
Kung Cherng Investment Co., Ltd.
Chi Cherng Investment Co., Ltd.
Emerging Alliance Fund, LP
400,000
400,000
400,000
400,000
400,000
400,000
876,734
713,191
54,294
658,896
119,054
113,010
110,960
633,142
133
633,009
78,283
77,405
77,008
723,241
56,686
666,555
167,452
116,311
113,755
640,136
10,728
629,408
711,380
133
711,247
636,779
10,001
626,778
73,106
78,537
75,063
72,976
117,006
76,937
76,241
74,944
103,603
745,343
0
745,343
5,600
(25,551)
(127,249)
Vanguard Int'l Semiconductor Corp.
22,000,000
28,464,864
15,072,105
13,392,759
9,110,492
(4,714,841)
(8,692,423)
VIS Associates Inc.
1,437,409
994,040
91,042
902,998
(125,309)
(194,178)
(194,178)
VIS Investment Holding, Inc.
236,243
34,497
3,325
31,172
20,558
261
636
N.A.
2.77
1.93
2.84
2.93
1.91
2.59
N.A.
(3.95)
(4.73)
9.43
*For the year ended December 31, 2001
134
T S M C A n n u a l R e p o r t 2 0 0 1
Taiwan Semiconductor Manufacturing Company Ltd., and
Vanguard International Semiconductor Corporation
Combined Financial Statements as of December 31, 2001
Representation Letter
The combined balance sheet as of December 31, 2001 and the combined statement of income for the year ended
December 31, 2001 of TA I WAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND V A N G UA R D
I N T E R N ATIONAL SEMICONDUCTOR CORPORATION were in conformity with the requirements on public companies
and their affiliates, taken as a whole, of Securities and Futures Committee (SFC) in the Republic of China (ROC), the
ROC regulations governing the preparation of financial statements of public companies and accounting principles
generally accepted in the Republic of China.
The accounting records underlying the combined balance sheet and the combined statement of income accurately
and fairly reflect, in reasonable detail, the transactions of the Taiwan Semiconductors Manufacturing Company, Ltd.,
its consolidated affiliates and Vanguard International Semiconductor Corporation. There are no plans or intentions
that may materially affect the carrying values or classifications of assets and liabilities.
Very truly yours,
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
By
MORRIS CHANG
Chairman
T S M C A n n u a l R e p o r t 2 0 0 1
135
English Translation of a Report Originally Issued in Chinese
Independent Auditors' Report
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Ltd.
We have reviewed the combined balance sheet as of December 31, 2001 and the related combined statement of
income for the year then ended of Taiwan Semiconductor Manufacturing Company Ltd. and Vanguard International
Semiconductor Corporation. Our reviews were made in accordance with the Guidelines for the Review of Combined
Financial Statements of Affiliates. It is substantially less in scope than an examination in accordance with auditing
standards generally accepted in the Republic of China, the objective of which is the expression of an opinion
regarding the combined balance sheet and the combined statement of income taken as a whole. Accordingly, we do
not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the combined balance
sheet and the combined statement of income referred to above in order for them to be in conformity with
"Regulations Governing the Preparation of Affiliates' Combined Operating Report, Combined Financial Statements
and Relationship Report" in the Republic of China, and the ROC regulation governing the preparation of financial
statements of public company and the ROC generally accepted accounting principles.
T N Soong & Co
A Member Firm of Andersen Worldwide, S.C.
Taipei, Taiwan
The Republic of China
January 18, 2002
Notice to Readers
The combined financial statements were not prepared with a view to comply with the published guidelines of the
United States Securities and Exchange Commission or the American Institute of Certified Public Accountants ("AICPA")
and have not been examined or otherwise reported upon under AICPA guidelines. They are not presented in
accordance with generally accepted accounting principles in the United States of America for consolidated financial
statements.
136
T S M C A n n u a l R e p o r t 2 0 0 1
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
COMBINED BALANCE SHEET
December 31, 2001
(In Thousand New Taiwan Dollars, Except Par Value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)
Short-term investments (Notes 2, 5 and 10)
Receivables from related parties (Note 17)
Notes receivable
Accounts receivable
Allowance for doubtful receivables (Note 2)
Allowance for sales returns and others (Note 2)
Inventories-net (Notes 2 and 6)
Deferred income tax assets (Notes 2 and 16)
Prepaid expenses and other current assets (Notes 17 and 20)
Total Current Assets
LONG-TERM INVESTMENTS (Notes 2, 7 and 21)
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8, 12, 17 and 18)
Cost
Land and land improvements
Buildings
Machinery and equipment
Office and other equipment
Total cost
Accumulated depreciation
Advance payments and construction in progress
Net Property, Plant and Equipment
COMBINED DEBITS (Note 2)
OTHER ASSETS
Deferred income taxes assets (Notes 2 and 16)
Deferred charges - net (Notes 2 and 9)
Refundable deposits
Assets leased to others (Note 2)
Miscellaneous
Total Other Assets
Amount
$40,522,659
2,498,071
174,607
176,582
20,486,089
(1,127,995)
(2,659,592)
10,955,840
2,700,422
2,975,813
76,702,496
12,746,162
877,371
68,402,999
313,488,096
6,335,976
389,104,442
(183,581,965)
60,092,310
265,614,787
11,437,572
18,992,893
3,863,875
787,347
555,053
38,594
24,237,762
%
10
1
-
-
5
-
(1)
3
1
1
20
3
-
18
80
2
100
(47)
15
68
3
5
1
-
-
-
6
TOTAL ASSETS
$390,738,779
100
The accompanying notes are an integral part of the combined financial statements.
T S M C A n n u a l R e p o r t 2 0 0 1
137
LIABILITIES AND SHAREHOLDERS' EQUITY
Amount
%
CURRENT LIABILITIES
Short-term bank loans (Note 10)
Commercial paper (Note 11)
Payable to related parties (Note 17)
Accounts payable
Payable to contractors and equipment suppliers
Income tax payable (Notes 2 and 16)
Current portion of long-term debt (Notes 12 and 13)
Accrued expenses and other current liabilities (Note 20)
Total Current Liabilities
LONG-TERM LIABILITIES
Long-term bank loans (Note 12)
Bonds (Note 13)
Total Long-term Liabilities
OTHER LIABILITIES
Guarantee deposits (Note 19 and 20)
Accrued pension costs (Notes 2 and 15)
Deferred gain on sale-leaseback (Note 2)
Miscellaneous
Total Other Liabilities
MINORITY INTEREST IN AFFILIATES (Note 2)
$6,849,364
1,270,000
553,305
1,744,553
12,999,508
81,483
8,286,000
7,303,209
2
-
-
1
3
-
2
2
39,087,422
10
27,941,360
25,850,000
53,791,360
7,964,078
2,156,367
268,165
154,003
10,542,613
10,127,309
7
7
14
2
1
-
-
3
2
Total Liabilities
113,548,704
29
SHAREHOLDERS' EQUITY (Notes 2 and 14)
Capital stock - $10 par value
Authorized: 24,600,000 thousand shares
Issued:Preferred - 1,300,000 thousand shares
Common - 16,832,554 thousand shares
Capital surplus
Retained earnings:
Appropriated as legal reserve
Appropriated as special reserve
Unappropriated earnings
Cumulative translation adjustments
Total Shareholders' Equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of the combined financial statements.
13,000,000
168,325,531
57,128,433
17,180,067
349,941
19,977,402
1,228,701
3
43
15
4
-
5
1
277,190,075
$390,738,779
71
100
138
T S M C A n n u a l R e p o r t 2 0 0 1
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.,
AND VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 2001
(In Thousand New Taiwan Dollars, Except Combined Earnings Per Share)
GROSS SALES (Notes 2, 17 and 21)
SALES RETURNS AND ALLOWANCES (Note 2)
NET SALES
COST OF SALES (Note 17)
GROSS PROFIT
OPERATING EXPENSES (Notes 17 and 21)
Research and development
General and administrative
Marketing
Total Operating Expenses
INCOME FROM OPERATIONS
NON-OPERATING INCOME (Notes 17 and 21)
Interest
Gain on sales of short-term investments - net (Note 2)
Royalty income (Note 19)
Insurance compensation - net
Premium income (Notes 2 and 20)
Gain on sales of long-term investments - net
Technology service income (Notes 17 and 19)
Gain on sales of property, plant, and equipment
Other
Total Non-Operating Income
NON-OPERATING EXPENSES (Note 21)
Interest (Notes 2, 8 and 20)
Losses on inventories (Note 2)
Equity in net loss of investee companies - net (Notes 2 and 7)
Loss on sales of and impairment loss on property, plant and equipment,
and non-operating properties
Foreign exchange loss - net (Note 2)
Loss on write-down of royalty
Amortization of issuance costs of bonds (Note 2)
Other
(Forward)
Amount
%
$133,248,102
(3,040,708)
130,207,394
100
99,823,070
30,384,324
11,280,348
8,486,544
2,378,757
22,145,649
8,238,675
1,690,311
1,635,978
1,301,606
860,835
234,732
110,623
55,077
52,376
641,251
6,582,789
3,873,923
2,871,739
1,915,342
1,192,335
704,749
144,125
12,504
415,562
77
23
9
6
2
17
6
1
1
1
1
-
-
-
-
1
5
3
2
1
1
1
-
-
-
T S M C A n n u a l R e p o r t 2 0 0 1
139
Total Non-Operating Expenses
INCOME BEFORE INCOME TAX (Note 21)
INCOME TAX BENEFIT (Notes 2 and 16)
INCOME BEFORE MINORITY INTEREST
MINORITY INTEREST IN LOSS OF AFFILIATES (Note 2 and 21)
COMBINED NET INCOME
COMBINED EARNINGS PER SHARE
Amount
$11,130,279
3,691,185
4,341,019
8,032,204
6,450,970
%
8
3
3
6
5
$14,483,174
11
Based on weighted-average shares outstanding of 16,832,554 thousand shares
$0.83
The accompanying notes are an integral part of the combined financial statements.
140
T S M C A n n u a l R e p o r t 2 0 0 1
English Translation of Financial Statements Originally Issued in Chinese
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.,
AND VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(Amounts in Thousand New Taiwan Dollars, Unless Specified Otherwise)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), a corporation incorporated in the Republic of China,
and Vanguard International Semiconductor Corporation (VIS), TSMC's 25% owned affiliate are engaged mainly in the:
(a) research, manufacture, sale, packaging, testing and computer-aided design of integrated circuits and other
semiconductor devices; and, (b) manufacture of masks.
Notice to Readers:
The combined financial statements include the consolidated accounts of TSMC plus the accounts of VIS, not a
consolidated subsidiary of TSMC. TSMC's consolidated financial statements prepared in accordance with U.S.
generally accepted accounting principles, would not include the assets, liabilities, revenues or expenses of VIS.
In September 1994, TSMC's shares were listed on the Taiwan Stock Exchange. On October 8, 1997, TSMC listed its
shares of stock on the New York Stock Exchange in the form of American Depositary Shares (ADSs). VIS's shares were
listed on the Republic of China (ROC) Over-the-Counter Securities Exchange starting March 25, 1998.
TSMC has five direct wholly-owned subsidiaries, namely, TSMC-North America, Taiwan Semiconductor Manufacturing
Company Europe B.V (TSMC-Europe), TSMC-Japan, TSMC International Investment, TSMC Partners, a 99.5% owned
subsidiary, Emerging Alliance Fund; and several 25% owned investment holding affiliates - Po Cherng Investment, Chi
Hsin Investment, Kung Cherng Investment, Chi Cherng Investment, Hsin Ruey Investment and Cherng Huei
Investment. TSMC International Investment has two wholly-owned subsidiaries - TSMC Development, Inc. and TSMC
Technology Inc., and two 97%-owned subsidiaries - InveStar Semiconductor Development Fund, Inc. and InveStar
Semiconductor Development Fund (II), Inc. TSMC Development Inc. has a subsidiary, WaferTech, LLC, which has been
57% owned since its formation in 1996, increased to 68% owned in 1998; TSMC Development Inc. acquired an
additional 29% equity interest for US$474,640 and 2% equity interest for US$19,530 thousand in December 2000
and June 2001, respectively, thereby increasing its equity interest to 99% as of December 31, 2001.
T S M C-North America, TSMC-Europe and TSMC-Japan are engaged mainly in marketing and engineering support
activities. TSMC Partners, Emerging Alliance Fund and the investment holding affiliates are engaged in investments.
TSMC International Investment and its subsidiaries invests in companies the business operations of which primaily
focus on the design, manufacture and related semiconductor business Wa f e r Tech, LLC. is engaged in the foundry
business and subsidiaries of VIS are engaged in marketing, research, development and investment.
T S M C A n n u a l R e p o r t 2 0 0 1
141
The following diagram presents information regarding the relationship and ownership percentages among TSMC, VIS
and their affiliates as of December 31, 2001:
TSMC
25%
VIS
100%
100%
100%
100%
100%
25%
99%
TSMC-North
America
TSMC-Japan
TSMC
International
Investment
TSMC-Europe
TSMC Partners
Po Cherng
Investment
etc.
Emerging
Alliance Fund
100%
Vanguard
100%
TSMC-
100%
TSMC-
97%
97%
InveStar
InveStar (II)
Associates Inc.
Technology
Development
99%
WAFERTECH
100%
VIS Investment
Holding Inc.
100%
100%
VIS-Micro
VIS-America
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Combination
The combined financial statements include the accounts of TSMC and the aforementioned affiliates (hereinafter,
referred to individually or collectively as "Company"). All significant inter-company accounts and transactions have
been eliminated. Minority interests in InveStar, InveStar (II), WaferTech, Emerging Alliance Fund (a new entity in 2001)
are presented separately in the combined financial statements.
The total assets and/or revenues of investment of VIS in VIS Associates Inc. and its subsidiaries are less than 10% of
those of Company and, therefore, TSMC is not required to, and did not prepare the combined financial statement.
Cash and cash equivalents
Government bonds acquired under repurchase agreements that provide for their repurchase with less than three
months from date of purchase are classified as cash equivalents.
Short-term investments
Short-term investments are carried at the lower of cost or market value. The costs of investments sold are determined
using the specific identification method.
Allowance for doubtful receivables
Allowance for doubtful receivables are provided based on a review of the collectibility of accounts receivable.
142
T S M C A n n u a l R e p o r t 2 0 0 1
Sales and Allowance for sales returns and others
Sales are recognized when titles of products and risks of ownerships are transferred to customers, primarily upon
shipment. Allowance and related provisions for sales returns and others are provided based on experience; such
provisions are deducted from sales and related costs are deducted from cost of sales.
Inventories
Inventories are stated at the lower of cost or market value. Inventories are recorded at standard costs, which are
adjusted to approximate weighted average cost at the end of each period. Market value represents net realizable
value for finished goods and work in process, and replacement value for raw materials, supplies and spare parts.
Long-term investments
Investments in shares of stock of companies wherein the Company exercises significant influence on their operating
and financial policy decisions are accounted for using the equity method. The difference between the investment
cost and the Company's proportionate equity in the net assets of the investee on the date of acquisition is amortized
over five years using the straight-line method. Such amortization and the Company's proportionate share in the net
income or net loss of investee companies are recognized as components of "Equity in net income or net loss in
investee companies - net" account. When the Company subscribes to additional investee shares at a percentage
different from its existing equity interest, the resulting carrying amount of the investment in equity investee differs
from the amount of Company's proportionate share in the investee's net equity. The Company records such
difference as an adjustment to "Capital surplus" and the "Long-term investments" accounts, respectively.
In the event an investee offsets its capital surplus, excluding reserve from asset revaluation, against its accumulated
deficit, which is recorded as a debit to the "Capital surplus" account and a credit to "Retained earnings" account, the
Company also records the entry by its proportionate share of the investee capital surplus that was generated
subsequent to its acquisition of investee interest, excluding reserve from asset revaluation.
Other stock investments are accounted using the cost method. These investments are stated at cost less declines in
market value of listed stocks or other than temporary declines in value of unlisted stock. Such reductions are charged
to shareholders' equity or current income, respectively. Cash dividends are recognized as income in the year received
but are accounted for as reduction in the carrying value of the long-term investment if the dividends are received in
the same year that the related investments are acquired. Stock dividends are recognized only as an increase in the
number of stocks held on the ex-dividend date.
Investments in foreign mutual funds are stated at the lower of cost or net asset value (NAV). Write-downs of cost and
write-ups to original acquisition cost resulting from subsequent recovery in NAV are debited or credited to
shareholders' equity.
Investment in convertible notes and stock purchase warrants are carried at cost.
The costs of investments sold are determined using the weighted average method.
T S M C A n n u a l R e p o r t 2 0 0 1
143
The Company's proportionate share in the gains from disposal of property, plant and equipment, net of the
applicable income tax, included as part of its share in the earnings or losses of investee companies accounted for
using the equity method for the current year is reclassified into capital surplus from retained earnings. Such capital
surplus is reclassified back to retained earnings when the Company subsequently disposes such investment. Also, if
an investee company has unrealized loss on its own long-term investment which is evaluated by lower-of-cost-or-
market method, the Company recognizes that unrealized loss in proportion to the Company's equity interest and
record in an account as a component of shareholders' equity.
Gains or losses on transactions with investee companies accounted using the equity method are eliminated in
proportion to the Company's ownership percentage while those with majority-owned subsidiaries are eliminated
entirely in consolidation.
Property, plant and equipment and leased assets
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Major
additions, renewals, betterment and interest expenses incurred during the construction period are capitalized.
Maintenance and repairs are expensed currently.
P r o p e r t y, plant and equipment covered by agreements qualifying as capital leases are carried at the lower of the
present value of all minimum future rental payments, or the market value of the property at the inception date of the
lease. The lessee's periodic rental payment includes the purchase price of the leased property, and the interest
expense.
Depreciation is computed using the straight-line method over these estimated service lives: Land improvements - 20
years; Buildings - 5 to 20 years; machinery and equipment - 5 to 10 years; office and other equipment - 2 to 7 years.
Upon sale or disposal of an item of property, plant and equipment, the related cost and accumulated depreciation
are removed from the accounts, and any gain or loss is credited or charged to income. Any such gain, less applicable
income tax, is reclassified to capital surplus at the end of the year (before the relevant regulation was amended).
Combined debits
Combined debits arose from the business merger and the difference between the investment cost and the Company's
proportionate share in the net asset of the investee companies at the date of acquisition. The combined debits are
amortized using the straight-line method over 10 years.
Deferred charges
Deferred charges consist of technology, patent, software and system design costs, technology know-how, bond and
financing issue cost and technology license fee. These are amortized as follows: Technology - ten years, patent - two
to ten years, software and system design costs and technology know-how - three to five years, bond and financing
issue costs - the term of the bonds and the related line of credit, and technology license fee - the term of the contract
or economic useful lives of the related technology.
Pension costs
Net periodic pension costs are recorded on the basis of actuarial calculations. Unrecognized net transition obligation
and unrecognized net gain of TSMC are amortized over 25 years, and unrecognized net transition asset of VIS is
amortized over 26 years.
Deferred gain on sale-leaseback
The gain resulting from the sale of leased property is deferred. Such deferred gain is then amortized as follows: (a)
operating lease - adjustment of rental expenses over the term of the lease, and (b) capital lease - adjustment of
depreciation over the estimated useful lives or term of the lease; whichever is shorter.
144
T S M C A n n u a l R e p o r t 2 0 0 1
Income tax
The Company adopted the inter-period income tax allocation method. Deferred income taxes are recognized for the
tax effects of temporary differences, unused tax credits, and operating loss carry forwards. Valuation allowance is
provided for deferred income tax assets that are not certain to be realized. A deferred tax asset or liability is,
according to the classification of its related asset or liability, classified as current or non-current. However, if a
deferred asset or liability cannot be related to an asset or liability in the financial statements, then, it is classified as
current or non-current based on the expected reversal date of temporary differences.
Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.
Income taxes (10%) on unappropriated earnings of TSMC and VIS are recorded as expense in the year when the
shareholders have resolved that the earnings shall be retained.
Derivative financial instruments
Foreign currency forward exchange contracts (forward contracts), entered into for purposes other than trading are
recorded as follows: the differences in the New Taiwan dollar amounts translated using the spot rates and the
amounts translated using the contracted forward rates are amortized over the terms of the forward contracts using
the straight-line method. At the balance sheet dates, the receivables or payables arising from forward contracts are
restated using the prevailing spot rates and the resulting differences are recognized in income. Also, the receivables
and payables related to the forward contract are netted out and the resulting net amount is presented as either an
asset or liability.
The foreign currency amount of forward contracts, entered into for the purposes of hedging foreign currency firm
commitments, are recorded as receivable or payable at spot rate on the contract date. The difference between the
foreign currency amount computed using the spot rate and the foreign currency amount computed using the
forward rate at the inception dates of the contracts are amortized over the term of the forward contract using the
straight-line method. At the balance sheet dates, the foreign currency amount of the forward contract are
remeasured using prevailing rates. The difference arising from the re-measurement is deferred and included as
adjustment to the transaction price when the commitments are realized. The receivables and/or payables related to
the forward contract are netted out and the resulting net amount is presented as either an asset or liability. The
foreign exchange difference arising from the settlement of the forward contract is presented as the adjustment to the
transaction price when the commitment are realized.
The Company enters into interest rate swap transactions to manage exposures to changes in interest rates on existing
liabilities. These transactions are accounted for on an accrual basis, in which cash settlement receivable or payable is
recorded as an adjustment to interest income or expenses.
The notional amounts of the foreign currency option contracts entered into for hedging purposes are not recognized
as either assets or liabilities on the contract dates. The amount paid or received (or premiums) for the call or put
options are amortized using the straight-line method over the terms of the contracts.
Other foreign-currency transactions
Other foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the
transactions occur. Gains or losses caused by the application of different foreign exchange rates when cash in foreign
currency is converted into New Taiwan dollars, or when foreign-currency receivables and payables are settled,
credited or charged to income in the year of conversion or settlement. At year-end, the balances of foreign-currency
assets and liabilities are restated based on prevailing exchange rates and any resulting gains or losses are credited or
charged to income.
T S M C A n n u a l R e p o r t 2 0 0 1
145
Translation of foreign - currency financial statements
ROC Financial Accounting Standards (FAS) No. 14, "Accounting for Foreign-Currency Transactions," applies to foreign
operations, with the local currency of each foreign subsidiary is its functional currency. The financial statements of
such foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: assets and liabilities
- current rate; shareholders' equity - historical rates; income and expenses - weighted average rate during the year.
The resulting translation adjustment is recorded as a separate component of shareholders' equity.
3. SIGNIFICANT ELIMINATING ENTRIES
Company
TSMC
Account
Payable to related parties
Receivable from related parties
Sales
Purchase
Marketing expenses - commissions
Marketing expenses - service charge
Non-operating income
Gain on sales of properties
TSMC-
International
Investment
TSMC Partners
TSMC -
Technology
Royalty income
Notes receivable
Interest receivable
Interest revenue
Notes receivable
Deferred revenue
Royalty income
Interest income
Accounts payable
Sales
Deferred revenue
Royalty income
Accounts receivable
Amount
$817,616
548,472
136,443
54,601
$15,355
10,318
320,179
25,251
3,878
Transaction Entity
WAFERTECH, LLC
VIS
TSMC-North America
TSMC-Europe
TSMC-Japan
TSMC-Technology
VIS
WAFERTECH, LLC
TSMC-Technology
1,177,094
VIS
3,111
WAFERTECH, LLC
6,797,817
3,801,975
1,028,725
194,696
124,384
118,648
467
268,871
WAFERTECH, LLC
VIS
TSMC-North America
TSMC-Japan
TSMC-Europe
TSMC-North America
VIS
VIS
1,223,373
TSMC-Technology
349,990
181,352
26,269
TSMC-Technology
TSMC-Technology
TSMC-Technology
11,344,120
10,079,712
TSMC International Investment
TSMC International Investment
1,220,256
TSMC International Investment
712,046
TSMC International Investment
6,888
57,501
28,395
14,473
7,960
TSMC-North America
WAFERTECH, LLC
WAFERTECH, LLC
WAFERTECH, LLC
WAFERTECH, LLC
146
T S M C A n n u a l R e p o r t 2 0 0 1
4. CASH AND CASH EQUIVALENTS
Cash and bank deposits
Government bonds acquired under repurchase agreements
5. SHORT TERM INVESTMENTS
Listed stocks
Mutual funds
Market value
6. INVENTORIES - NET
Finished goods
Work in process
Raw materials
Supplies and spare parts
Less - allowance for losses
7. LONG-TERM INVESTMENTS
Common stocks
Accounted for equity method:
VIS Associates Inc.
Systems on Silicon Manufacturing Company Pte Ltd.
(SSMC)
Accounted for cost method:
Traded
Powerchip Semiconductor Corporation
Amkor Technology
Etron Technology Inc.
Taiwan Mask
(Forward)
$38,677,000
1,845,659
$40,522,659
$1,398,071
1,100,000
$2,498,071
$8,027,321
$2,668,580
10,245,430
810,558
1,409,049
15,133,617
(4,177,777)
$10,955,840
C a r r y i n g
Value
% of
O w n e r
Ship
$902,999
100
2,907,967
25
3,810,966
2,651,216
280,748
275,766
32,129
9
-
3
2
T S M C A n n u a l R e p o r t 2 0 0 1
147
Non-traded
Walsin Advanced Electronics
United Technology
Global Test Corp.
Megic
Hong Tung Venture Capital
Global Investment Holding
Shin-Etsu Handotai Taiwan
ChipStrate Technology
Programmable Microelectronics
APE
W.K. Technology Fund IV
Richtek Technology, Inc.
EmpowerTel Networks
3Dfx Interactive
Ubicom, Inc. (Scenix)
Capella Microsystems
Equator Technologies
Divio
Preferred stocks (all non-traded)
Sonics
EmpowerTel Networks
Tropian, Inc.
Formfactor
Atheros Communications
Monolithic Power System
Quickilver Technology
LightSpeed Semiconductor
Memsic
Equator Technologies
Pixim
OEpic
Capella Microsystems
Signia
Newport Opticom
RapidStream
Reflectivity
NanoAmp Solutions
NetLogic Microsystems
Integrated Memory Logic
Match Lab
Y-MEDIA
Rise Technology
Creosys
Ikanos Communication
(Forward)
148
T S M C A n n u a l R e p o r t 2 0 0 1
414,481
232,300
179,951
177,000
150,000
107,270
105,000
69,658
59,296
46,748
50,000
10
13
10
9
10
6
7
9
4
6
2
45,015
10
12,031
10,396
6,028
4,740
3,151
105
4,913,029
231,397
179,480
151,688
134,358
125,754
123,037
122,497
107,251
107,088
99,358
87,498
87,497
80,441
78,748
77,124
73,754
69,998
64,838
64,748
63,318
61,249
52,499
52,498
52,498
52,498
1
-
2
2
-
-
7
7
5
2
2
18
29
1
20
2
3
6
8
20
15
6
6
3
1
10
10
2
2
8
3
Ralink Technology
SiRF Technology
Ubicom, Inc. (Scenix)
Advanced Angalogic Technology
OmegaBand (Seagull)
Pico Turbo
Sensory
HINT Corporation
Litchfield
Quake Technology
Procoat Technology
Angstron System
Divio
Incentia Design Systems
Silicon Data, Inc.
Convertible note (all non-traded)
Rise Technology
Pico Turbo
OmegaBand (Seagull)
Funds
Crimson Asia Capital
Horizon Ventures
BIAM Global Opportunity Fund
Warrant
OEpic
The equity in net losses of subsidiaries and investee companies consisted of following:
VIS Associates Inc.
SSMC
52,498
51,248
47,636
44,131
43,749
43,749
43,749
34,999
34,999
34,999
7
1
2
2
6
7
4
5
6
1
30,000
10
26,249
17,500
17,499
8,750
2,932,869
10,500
10,323
6,730
27,553
27,091
125,701
908,944
1,061,736
9
$12,746,162
7
4
2
2
-
-
-
-
-
-
-
($193,262)
(1,722,080)
($1,915,342)
The carrying values of equity-accounted investments and the related equity in net income or net loss were based on
audited of financial statements in the same period.
Information on long-term investments is as follows:
Market value of traded stocks
Equity in the net assets of unlisted stocks
Net asset value of funds
$4,017,454
9,856,355
1,202,453
T S M C A n n u a l R e p o r t 2 0 0 1
149
8. PROPERTY, PLANT, AND EQUIPMENT
Accumulated depreciation consists of the following:
Land improvements
Buildings
Machinery and equipment
Office and other equipment
$108,770
20,123,652
159,908,115
3,441,428
$183,581,965
Information on the status of the construction of the manufacturing facilities of TSMC as of December 31, 2001 is as
follows:
Manufacturing Plant
TSMC's Fab 6
TSMC's Fab 7
TSMC's Fab 8
TSMC's Fab 12 - 1st stage
TSMC's Fab 14 - 1st stage
Estimated Cost
$76,889,000
5,930,500
28,322,100
38,280,800
9,711,000
Accumulated
Expenditures
$69,986,000
2,867,500
11,355,300
28,988,700
8,449,600
Expected or Actual
Date of Start of
Operations
March 2000
March 2001
March 2001
April 2002
June 2003
Interest expense (gross of capitalized amount of NT$537,713 thousand), for the years ended December 31, 2001 was
NT$4,411,636 thousand. The interest rates used for purposes of calculating the capitalized amount were 2.54% to
6.755%.
9. DEFERRED CHARGES - NET
Software and system design costs
Technology licensing fee
Technology know - how
Bond and financing issue costs
Others
$2,162,419
996,578
103,500
155,650
445,728
$3,863,875
150
T S M C A n n u a l R e p o r t 2 0 0 1
10. SHORT-TERM BANK LOANS
Secured loan in NT dollars:
NT$ 107,100 thousand, repayable by October 2002,annual interest at 3.2%~3.8%
$107,100
Unsecured loan:
NT$ 20,000 thousand, repayable by January 2002,
annual interest 2.85%
US$16,006 thousand, repayable by January to June 2001,
annual interest 2.38%-2.9%
US$ 82,000 thousand, repayable by March 2002,
annual interest at 2.679%
US$5,500 thousand, repayable by June 2002,
annual interest at 3.188%
US$21,565 thousand, repayable by October 2002,
annual interest at 2.590%
US$46,000 thousand, repayable by October 2002,
annual interest at 2.548%
US$21,000 thousand, repayable by May 2002,
annual interest at 2.33%
20,000
560,183
2,869,918
192,495
754,735
1,609,954
734,979
$6,849,364
Unused credit lines as of December 31, 2001 aggregated approximately NT$25,099,000 thousand (consisting of
NT$13,729,900 thousand and US$324,836 thousand).
The NT$107,100 thousand loan is secured by short-term investment with carrying amount of NT$71,400 thousand.
11. COMMERCIAL PAPER
These instruments, which bear annual interest retes ranging from 3.35% to 4.45%, are secured by bank guaranty and
payable between March 2002 to June 2002.
T S M C A n n u a l R e p o r t 2 0 0 1
151
12. LONG-TERM BANK LOANS
Unsecured loan:
US$200,000 thousand, repayable by December 2003,
annual interest at 2.54%
Secured loan:
US$440,000 thousand, repayable by February 28, 2005,
annual interest at 2.578%
Loans for facility and importation of equipment - repayable in semi-annual installments starting
from November 1999 to June 2004,floating interest 4%~ 6.35%
Loans for importation of equipment - repayable in semi-annual installments starting
from October 2000 to October 2005, interest at3.95~ 6.42%
Loans for importation of equipment - repayable in quarterly installments starting
from January 2003 to July 2007, interest at6.475%~6.765%
Loans for importation of equipment - repayable in semi-annual installments starting
from February 2000 to February 2005, interest at6.225%~6.765%
Loans for importation of equipment - repayable in semi-annual installments starting
from July 1999 to July 2004, interest at6.35%~6.64%
Loans for importation of equipment - repayable in semi-annual installments starting
from February 1998 to February 2003,interest at 6.475%~6.765%
Loans for import of equipment - repayable in semi-annual installments starting
from May 1997 to May 2002, interest at floating rate 6.475%~6.765%
Commercial paper - guaranteed by the bank, repayable in May 2004, interest at 2.41%.
Less-current portion
$6,999,800
15,399,560
3,900,000
2,920,000
330,000
256,000
220,000
112,000
40,000
300,000
30,477,360
(2,536,000)
$27,941,360
Future minimum principal payments under the Company's loan arrangements as of December 31, 2001 are as
follows:
Year
2002
2003
2004
2005
2006 and thereafter
Amount
$2,536,000
9,518,800
2,021,333
16,272,893
128,334
$30,477,360
As of December 31, 2001, the US$440,000 thousand loan is secured by the assets of WaferTech, LLC with carrying
amount of approximately NT$28,378,000 thousand (US$811,000 thousand). In addition, a portion of the unused
credit line is secured by properties owned by TSMC with carrying value of approximately NT$1,378,000 thousand.
Properties of VIS with carryihg value of NT$7,520,540 thousand have been pledged or mortgaged as collateral mainly
for long-term debts.
The bonds and loan agreements require, among other things, the maintenance of specific financial ratios. As of
December 31, 2001, certain financial ratios were not in compliance with the agreements. The agreements also
require the Corporation to either issue capital stock for cash (in which case, the board of directors need to approve it
by February 1, 2002) or obtain additional financing with the concurrence of the bank syndicate before June 2002.
Unused credit lines for long-term bank loans as of December 31, 2001 aggregated approximately NT$4,391,000
thousand (consisting of NT$3,070,000 thousand and US$37,750 thousand).
152
T S M C A n n u a l R e p o r t 2 0 0 1
13. BONDS
Domestic unsecured bonds:
Repayable in March 2003, 7.71% annual interest payable semi-annually
Repayable in October 2002 and 2004, 5.67% and 5.95% annual
interest payable annually, respectively
Repayable in December 2005 and 2007, 5.25% and 5.36% annual
interest payable annually, respectively
Domestic secured bonds:
Repayable in annual installments from November 6, 2000 to November 6, 2003,
interest at 6.59%,guaranteed by financial institution.
Repayable in annual installments from November 15, 2005 to November 15, 2006,
interest at 3.5%~3.6%, guaranteed by financial institution.
Less-current portion
$4,000,000
10,000,000
15,000,000
1,500,000
1,100,000
31,600,000
(5,750,000)
$25,850,000
Future minimum principal payments under the Company's bonds arrangements as of December 31, 2001 are as
follows:
Year
2002
2003
2004
2005
2006 and thereafter
Less-current portion
Amount
$5,750,000
4,750,000
5,000,000
11,050,000
5,050,000
31,600,000
(5,750,000)
$25,850,000
On November 6, 2001, the board of directors of TSMC approved the issuance of domestic unsecured bonds with an
aggregate principal amount of NT$15,000,000 thousand. The issuance of the domestic unsecured bond has been
approved by the Securities and Futures Commission of ROC (SFC). As of January 18, 2002, the issuance is still in
process.
VIS issued first bond amounting to NT$1,500,000 thousand in 6.59% annual interest rate guaranteed by the financial
institution that is repayable in annual installments from November 6, 2000 to November 6, 2003. The second bond
amounting to NT$1,100,000 thousand in 3.5%~3.6% annual interest rate is repayable in annual installment from
November 15, 2005 to November 15, 2006, and current portion is NT$750,000 thousand.
T S M C A n n u a l R e p o r t 2 0 0 1
153
14. SHAREHOLDERS' EQUITY
TSMC has issued 259,006 thousand American Depositary Shares (ADS) as of December 31, 2001. The number of
common shares represented by the ADSs is 1,295,031 thousand shares.
The SFC has, on January 4, 2002, approved TSMC's sponsorship of the offer by certain existing shareholders of up to
350,000 thousand common shares in the form of ADSs. The decision to sponsor the offering of common shares in
the form of ADSs was approved by the Board of Directors on December 3, 2001. The offering is still in process as of
January 18, 2002.
Capital surplus except for that arising from the application of the equity method of accounting, pursuant to ROC
Company Law, can only be used to offset a deficit or transferred to capital (as a stock dividend). Such transfer from
capital surplus to capital can only be made once a year at a specific percentage. An amendment to the ROC
Company Law issued on November 14, 2001, limited the nature of the capital surplus that can be used to offset a
deficit or transferred to capital (as a stock dividend) to those that arise from donations (donated capital) and those
attributable to the excess of the issue price over the par value of capital stock issued (paid-in capital).
TSMC's Articles of Incorporation provide that the following shall be appropriated from the annual net income (less
any deficit):
a. 10% legal reserve;
b. Special reserve in accordance with relevant laws or regulations;
c. Bonuses to directors and supervisors and to employees equal to 1% and at least 1% of the remainder, respectively;
d. Dividends to holders of preferred shares equal to a 3.5% annual rate, based on the period during which the
preferred shares have been outstanding;
e. The appropriation of the remaining balance after the above shall be decided at the shareholder's meeting;
Dividends are distributed in cash and/or in the form of shares of stock. Since the Company is in a capital-intensive
industry, distribution of profits shall be made preferably by way of stock dividend. The total of cash dividend paid (in
any given year) should not exceed 50% of total dividends paid and/or distributed.
These appropriations of net income shall be resolved by the shareholders in the following year and given effect in the
financial statements of that year.
The aforementioned appropriation for legal reserve is made until the reserve equals the aggregate par value of
TSMC's outstanding capital stock. The reserve can only be used to offset a deficit; or, when its balance has reached
50% of the aggregate par value of TSMC's outstanding capital stock, up to 50% thereof can be distributed as stock
dividend.
Pursuant to existing regulations promulgated by the Securities and Futures Commission, a special reserve equivalent
to the debit balance of any account shown in the shareholder equity section of the balance sheets, other than the
deficit, shall be made from unappropriated retained earnings. The special reserve shall be adjusted accordingly based
on the debit balance of such accounts as at year-end. As of December 31, 2001, prior year's accumulated deficit in
the amount of NT$1,803,168 thousand from WSMC is included in the unappropriated retained earnings.
Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident shareholders are
allowed a tax credit for the income tax paid by the Company on earnings generated starting January 1, 1998. An
154
T S M C A n n u a l R e p o r t 2 0 0 1
Imputation Credit Account (ICA) is maintained by TSMC and VIS for such income tax and the tax credit allocated to
each shareholder. The maximum credit available for allocation to each shareholder cannot exceed the balance shown
in the ICA on the date of distribution of dividends.
TSMC issued 1,300,000 thousand unlisted Series A - preferred shares to certain investors in November 29, 2000. The
following are the rights of the preferred share holders and other terms and conditions:
a. Are entitled to receive cumulative cash dividends at an annual rate of 3.5%.
b. Are not entitled to receive any stock dividends (whether declared out of unappropriated earnings or capital
surplus).
c. Have priority over the holders of common shares to the assets of the Company available for distribution to
shareholders upon liquidation or dissolution of the Company. However, the preemptive rights to the assets shall
not exceed the issue value of the shares.
d. Have voting rights similar to that of the holders of common shares.
e. Have no right to convert their shares into common shares.
f. Will be redeemed within thirty months from their issuance. The holders will have the foregoing rights and TSMC's
related obligation would remain the same, until the shares are actually redeemed by TSMC
15. PENSION PLAN
TSMC and its affiliates have pension plans for all regular employees, which provide benefits based on length of
service and average monthly salary for the final six months prior to retirement.
These companies make monthly contributions, equal to 2% of salaries to a pension fund (the "Fund"). The Fund is
administered by the pension fund monitoring committee (the "Committee") and deposited in the committee's name
in the Central Trust of China. The pension cost of VIS is accrued at an amount that is equal to a percentage (currently
6%) of salaries and wages.
Pension information are summarized as follows:
a. Components of pension cost
Service cost
Interest cost
Projected return on plan assets
Amortization
b. The details of the benefit obligation and reconciliation of the fund status of the plan
and accrued pension cost is as follows:
Benefit obligation
Vested benefit obligation
Nonvested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized prior service cost
(Forward)
$469,542
109,144
(50,438)
3,461
$531,709
$739
1,122,768
1,123,507
1,568,428
2,691,935
(956,069)
1,735,866
-
T S M C A n n u a l R e p o r t 2 0 0 1
155
Unrecognized net transitional assets
Unrecognized net transitional obligation
Unrecognized net gain
Additional liability
Accrued pension cost
c. Actuarial assumptions
Discount rate used in determining present values
Future salary increase rate
Expected rate of return on plan assets
d. Contributions to pension fund
e. Payments from pension fund
16. INCOME TAX
7,170
(157,691)
569,258
-
$2,154,603
5%
5%
5%
$148,465
$-
a. A reconciliation of income tax expense - current before tax credits and income tax expense on income before
income tax at statutory rate is shown below:
Income tax expense on "income before income tax" at statutory rate
Tax-exempt income
Temporary differences
Income tax expense - current before tax credits
b. Income tax benefits consists of:
Income tax expense - current before tax credits
Income tax credits
Additional 10% on the unappropriated earnings
Other income tax
Net change in deferred income tax assets (liabilities) for the year
Investment tax credits
Loss carried forward
Temporary differences
Valuation allowance
c. Deferred income tax assets (liabilities) consisted of :
Current
Investment tax credits
Loss carried forward
Temporary differences
Less-valuation on allowance
Noncurrent
Investment tax credits
Loss carried forward
Temporary differences
Less-valuation allowance
156
T S M C A n n u a l R e p o r t 2 0 0 1
($922,796)
1,107,147
(2,781,575)
($2,597,224)
($2,597,224)
2,928,317
(362,251)
(16,318)
(47,476)
2,457,899
1,525,241
(682,267)
1,087,622
$4,341,019
$2,979,032
257,591
3,147
3,239,770
(539,348)
$2,700,422
$22,704,199
3,156,253
(1,184,204)
24,676,248
(5,683,355)
$18,992,893
The effective tax rates for deferred income tax of TSMC and its affiliates as of December 31, 2001 were 17.56%,
and 25%-41%, respectively.
d. Integrated income tax information:
Balances of the imputation credit account
TSMC
VIS
$9,365
$6,158
TSMC and VIS's expected creditable ratio as of December 31, 2001 were 0.02% and 0%, respectively.
The imputation credit allocated to each shareholder shall be based on the balance in the ICA on the date of
distribution of dividends; thus the expected creditable ratio for 2001 may be adjusted according to the difference
between the expected and actual imputation credit allowed under the regulation.
e. The unappropriated retained earnings of TSMC as of December 31, 2001 included the earnings generated up to
December 31, 1997 of NT$4,827 thousand.
Unused investment tax credits arising from purchase of machinery and equipment, and research and development
expenditures as of December 31, 2001 will expire as follows:
Year of Expiry
2002
2003
2004
2005
2006
Loss Carried
Forward
$1,030,365
5,694,914
2,380,345
-
4,549,750
$13,655,374
Tax Credits
$5,119,926
6,032,425
11,097,088
3,433,792
-
$25,683,231
The income from the following expansion and construction of TSMC's manufacturing plants is exempt from income
tax:
Expansion of Fab1 and Fab2-modules A and B, Fab3 and Fab4, and construction of Fab5
Expansion of Fab7
VIS's first expansion of manufacturing plant
Tax-Exemption Period
1999 to 2002
1998 to 2001
2000 to 2003
The tax authorities have examined income tax returns of TSMC through 1999, excluding 1998. However, TSMC is
contesting the assessment of the tax authority for 1992, 1993, 1996 and 1997.
The tax authorities have examined income tax returns of VIS through 1998.
T S M C A n n u a l R e p o r t 2 0 0 1
157
17. RELATED PARTY TRANSACTIONS
TSMC and VIS engage in business transactions with the following related parties:
a. Industrial Technology Research Institute (ITRI), the Chairman of TSMC is one of the directors of ITRI.
b. Philips Electronics N.V., (Philips), a major shareholder of TSMC.
c. Systems on Silicon Manufacturing Company Pte Ltd. (SSMC), an investee of TSMC.
d. VIS America, an investee of VIS's subsidiary (VIS Associates Inc.).
e. VIS Micro, an investee of VIS's subsidiary (VIS Associates Inc.).
f. Walsin Lihwa Corporation (WLC), a shareholder and director of VIS.
g. Powerchip Semiconductor Corporation (PSC), VIS is one of the directors of PSC.
h. Walsin Advanced Electronics (WAE), VIS is one of the directors of WAE.
The transactions with the aforementioned parties in addition to those disclosed in other notes, are summarized as
follows:
During the year
Sales
Philips and its affiliates
ITRI
WAE
SSMC
Purchase
PSC
SSMC
Rental expenses - ITRI
Manufacturing expenses
Technical service fee - Philips
WAE
ITRI
PSC
General and administrative expenses - ITRI
Marketing expenses
VIS Micro
ITRI
Non-operating income
SSMC
PSC
(Forward)
158
T S M C A n n u a l R e p o r t 2 0 0 1
Amount
%
$2,398,257
114,546
67,664
48,972
$2,620,439
$69,770
42,984
$112,754
2
-
-
-
2
1
-
1
$161,604
11
$2,418,276
100
123,949
13,016
550
-
-
-
$2,555,791
100
$147
$20,427
124
$20,551
$95,284
1,090
-
1
-
1
1
-
WAE
Other equipment
WLC
At end of the year
Receivable
Philips and its affiliates
ITRI
SSMC
PSC
Prepayments and other current assets
ITRI (rental)
Payable
Philips and its affiliates
ITRI
WAE
VIS Micro
SSMC
PSC
100
$96,474
$2,292
$116,499
37,383
20,671
54
-
1
-
67
21
12
-
$174,607
100
$42,664
1
$499,331
90
33,034
17,889
2,532
470
49
6
3
1
-
-
$553,305
100
Transactions with related parties are based on normal prices and collection or payment terms except that VIS Micro
perform research and development and marketing activities for VIS and VIS pays actual expenses incurred related to
such undertakings plus a 5% mark-up and sales of technical service which were in accordance with the related
contracts.
18. SIGNIFICANT LONG-TERM OPERATING LEASES
TSMC leases from ITRI the land, building and certain machinery and equipment of its first manufacturing facility
under agreements that will expire in March 2002. The annual rent under such agreement amounts to NT$161,604
thousand.
TSMC leases the land where its 2nd through 14th manufacturing facilities are located from the Science-Based
Industrial Park Administration. The related agreements will expire on various dates from March 2008 to December
2020 and have annual rentals aggregating NT$208,716 thousand. The agreements can be renewable upon their
expiration.
TSMC-North America leases its office premises and certain equipment under a non-cancelable operating agreement,
which will expire in September 2020. TSMC-Europe entered into an office lease agreement covering its office premise,
which will expire in 2004; Annual rental currently is NT$101,395 thousand.
VIS leases the sites of its manufacturing plant and parking lot from the Hsinchu Science-Based Industrial Pa r k
Administration under agreements which will expire on April 2010 and June 2015, but renewable upon expiration.
Annual rentals aggregated to NT$23,812 thousand.
T S M C A n n u a l R e p o r t 2 0 0 1
159
VIS also leases machinery and equipment from Comdisco Trade Inc. under operating lease agreements through
November 2002, December 2002 and December 2003, respectively. Annual rentals aggregated to NT$271,655
thousand (US$7,762 thousand).
Future annual minimum rentals under the aforementioned leases are as follows:
Year
2002
2003
2004
2005
2006
2007 and thereafter
Amount
$643,166
346,723
336,736
335,007
337,992
2,366,328
$4,365,952
19. SIGNIFICANT COMMITMENTS AND CONTINGENCY AS OF DECEMBER 31, 2001
The significant commitments and contingency as of December 31, 2001 are as follows:
a. Under a Technical Cooperation Agreement with Philips, as amended on May 12, 1997, TSMC shall pay technical
assistance fees as a percentage of net sales, as defined in the agreement, of certain products. The agreement shall
remain in force up to July 9, 2007 and thereafter be automatically renewed for successive periods of three years.
Under the amended agreement, the fee is subject to deduction by the amounts TSMC pays to any third party for
settling any licensing/infringement issue after the first five-year period of the amended agreement, provided that
the fee after reduction will not be below a certain percentage of the net selling price.
b. Subject to certain equity ownership and notification requirements, Philips and its affiliates can avail themselves
each year of up to 30% of TSMC's production capacity.
c. Under a Technical Cooperation Agreement with ITRI, TSMC shall reserve and allocate up to 35% of certain of its
production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the
MOEA.
d. Under several foundry agreements, TSMC shall allocate a portion of its production output for sale to certain major
customers from whom guarantee deposits of US$205,949 thousand had been received as of December 31, 2001.
e. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. dated March 30, 1999,
the parties agreed to: (a) form a joint venture company to be named Systems on Silicon Manufacturing Company
Pte Ltd. (SSMC) for the purpose of constructing an integrated circuit foundry in Singapore, (b) set SSMC's total
authorized capital at about S$1.2 billion, and, (c) allow TSMC to invest in 32% of SSMC's capital. As of December
31, 2001, the aggregate amount of investments from these parties has not reached S$1.2 billion. TSMC and
Philips committed to buy a specific percentage of the production capacity of SSMC. If any party defaults on the
agreement and the capacity utilization of SSMC falls below a specific percentage of its total capacity, the
defaulting party should compensate SSMC for all related unavoidable costs.
f. Provision of technical services to SSMC under a Technical Cooperation Agreement (the "Agreement") entered into
on May 12, 1999. TSMC receives compensation for such services computed at a specific percentage of net selling
prices of specific products sold by SSMC. The Agreement remains in force for ten years and is automatically
renewed once for successive periods of five years unless pre-terminated by either party under certain conditions.
160
T S M C A n n u a l R e p o r t 2 0 0 1
g. Under a Technical Transfer Agreement with National Semiconductor Corporation ("National") entered into on June
27, 2000, TSMC shall receive payments for the technology transferred to National. The agreement will remain in
force for ten years. After expiration, this agreement will be automatically renewed once for successive periods of
two years unless pre-terminated by either party under certain conditions.
h. Under a patent license agreement, TSMC has entered into a cross license arrangement for certain semiconductor
patents with a US-based company for a term starting from October 26, 2001 through December 31, 2006. TSMC
shall pay royalty fees to the such company.
i. VIS shall pay royalties under various patent/license agreements as follows:
1) ITRI - at a specific percentage of sales of certain products for five years from November 11, 1994.
2) LUCENT Technologies, Inc. -(a) at a specific amount in three installments within three years and a percentage of
net sales of certain products for three years from January 1998; (b) at a specific amount and a specific percentage
of net sales of certain products within two years from January 1998.
3) Texas Instruments Incorporated-at a specific percentage of net sales of certain products for ten years from
January 1997.
4) HITACHI Corporation-at a specific amount in semi-annual installments within five years from May 1997.
5) NEC Corporation-at a specific amount in six installments from February 1999 to 2003.
6) MITSUBISHI Corporation - at specific amount and a specific percentage of net sales of certain products within
five years from August 1999.
j.
In 1996, Wa f e r Tech adopted an Executive Incentive Plan, which was amended in 1997. Under the 1997
amendment, the Board of Directors approved the Senior Executive Incentive Plan and the Employee Incentive Plan
("Plan") under which officers, key employees and nonemployee directors may be granted option rights. However,
WaferTech is a limited liability company and does not have shares of stock. Thus, each option right granted under
the Plan provides grantees rights to buy ownership interests in Wa f e r Tech. The Plans also provides for
approximately 6% of the total ownership interests to be available for grant, represented by 15.15 million-option
rights. For option rights granted to date, the option purchase price exceeded fair value as of the date of the grant.
While Wa f e r Tech may grant employees option rights that are exercisable at different times or within different
periods, it has generally granted option rights which are exercisable on a cumulative basis in annual instalments of
25% each on the first, second, third, and fourth anniversaries of the date of grant.
The following table summarizes information about the Plans:
Balance, January 1, 2001
Options granted
Option price > fair market value
Options exercised
Options cancelled
Balance, December 31, 2001
Option
Rights
Available
For Grant
Outstanding
Option Rights
Number of
Option
Rights
Exercise
Price
(US$)
3,782,166
6,836,644
-
-
825,906
4,608,072
-
(2,949,358)
(825,906)
3,061,380
1.23
-
1.02
1.27
1.43
These options will expire if not exercised at specific dates between May 2006 to December 2010.
T S M C A n n u a l R e p o r t 2 0 0 1
161
k. Under a management agreement, InveStar Capital Inc. (ISC) of the Cayman Islands provides investment and
administrative services to TSMC. ISC should receive quarterly, starting from October 1, 1996, a management fee
of 2% each year of total weighted average paid-in capital and capital surplus of TSMC, excluding retained earnings
and losses.
l. Wa f e r Tech had recorded a reserve of US$ 16,000 thousand for a litigation arising from a charge by certain
contractors that Wa f e r Tech caused the contractors to incur additional labor and material costs outside the
contracts. The reserve is reflected in accrued construction and equipment payable with the offset to construction
in progress. The remaining accrued reserve of US$5,250 thousand is sufficient for payments to the other
construction contractors in the year of 2002.
m.WaferTech, was assessed by the Department of Revenue of the State of Washington for deficiency excise taxes of
approximately US$6,900 thousand. Wa f e r Tech, intends to appeal the assessment. As of December 31, 2001,
WaferTech has recorded a reserve that management believes is sufficient to address any exposure related to this
tax assessment.
n. TSMC-North America started a stock appreciation right program from December 1, 2000, whereby the employees
received cash bonuses based on the appreciation of the quoted market price of the shares of stock of TSMC.
Compensation expenses are recorded based on the difference between the grant price and market price at the end
of each period. This expense is recognized ratably over the vesting period and adjusted based on fluctuations of
the stock in a period. As of December 31, 2001, TSMC North - America has recorded compensation expense and
has related accrued liability of approximately US$3,900 thousand.
o. Unused letter of credits as of December 31, 2001 were NT$21,962 thousand (consisting of NT$1,200 thousand,
US$177 thousand and JPY¥54,619 thousand).
20. ADDITIONAL DISCLOSURES
The following are the additional disclosures required by the SFC for TSMC and
its affiliates:
a. Financing provided: Please see Table 1 attached;
b. Endorsement guarantee provided: Please see Table 2 attached;
c. Marketable Securities held: Please see Table 3 attached;
d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in
capital: Please see Table 4 attached;
e. Acquisition of individual real estates at costs of at least NT$100 million or 20% of the paid-in capital: Please see
Table 5 attached;
f. Disposal of individual real estates at prices of at least NT$100 million or 20% of the paid-in capital: None;
g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Please see Table 6 attached;
h. Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see
Table 7 attached;
162
T S M C A n n u a l R e p o r t 2 0 0 1
i. Names, locations, and related information of investees on which the Company exercises significant influence:
Please see Table 8 attached.
j. Financial instrument transactions:
The relevant information on derivative financial instruments entered into by TSMC, VIS and their affiliates are as
follows:
1) Open forward exchange contracts as of December 31, 2001:
Contract
Currency
Contract
Amount
(Thousand)
Fair Value
(Thousand)
Settlement Date
Maturity
Amount
(Thousand)
TSMC
Sell
Sell
VIS
Sell
US$
US$
US$
US$17,912
NT$618,206
Jan. 2002
NT$620,600
US$783,000
NT$26,985,688
Jan.2002~Mar.2002
NT$27,013,402
US$1,000
(NT$549)
Jan. 2002
NT$34,452
The net payable from forward exchange contracts (shown in the balance sheet as part of "Other current liabilities"
account) as of December 31, 2001 aggregated to NT$400,378 thousand. Net exchange loss for the year ended
December 31, 2001 was NT$1,929,325 thousand.
The net assets or liabilities that have been hedged by the above forward exchange contracts are as follows:
Accounts receivable
Accounts payable
Time deposits
2) Interest rate swaps
Amount
(Thousands)
US$525,425
US$169,664
US$707,416
TSMC has entered into interest rate swap contracts to hedge exposure to rising interest rates on its floating rate long-
term bank loans. These significant transactions are summarized as follows:
Contract Date
April 28, 1998
April 29, 1998
June 26, 1998
June 26, 1998
Period
May 21, 1998 to May 21, 2003
May 21, 1998 to May 21, 2003
June 26, 1998 to June 26, 2003
July 6, 1998 to July 6, 2003
Amount
(Thousand)
NT$2,000,000
NT$1,000,000
NT$1,000,000
NT$1,000,000
Interest expense on these transactions for the years ended December 31, 2001 was NT$473,413 thousand.
T S M C A n n u a l R e p o r t 2 0 0 1
163
3) Option contracts
TSMC has entered into foreign currency option contracts to hedge risks of exchange rate fluctuations arising from its
anticipated U.S. dollar cash receipts from its export sales or Japanese Yen obligations related to its importation of
machinery and equipment.
Open option contracts as of December 31, 2001 were as follows:
Contract
Currency
(Thousand)
(Thousand)
(Thousand)
Strike Price
Maturity
Contract
Amount
Carrying
Value
Fair Value
Put option sell
EUR
EUR293,000
($39,500)
($252,833)
0.8940~0.9340
Jan. ~Feb., 2002
(US$/EUR)
For the year ended December 31, 2001, TSMC realized premium income of NT$328,254 thousand and premium
expenses of NT$93,522 thousand.
4) Cross Currency SWAP
VIS enters into currency SWAP contracts with the bank to hedge exposure on foreign currency exchange rate
fluctuations on various foreign currency transactions of VIS.
Open currency SWAP contracts as of December 31, 2001 were as follows:
Currency
Contract
Amount
(Thousand)
Fair Value
(Thousand)
Settlement Date
US$
US$5,000
(NT$2,712)
Jan. 2002
VIS
Sell
5) Transaction risk
a) Credit risk: The banks, which are the counter-parties to the foregoing derivative financial instruments, are
reputable financial institutions. Management believes its exposures related to the potential default by those
counter parties are low.
b) Market price risk. All derivative financial instruments are intended as hedges for fluctuations in currency exchanges
rates on the Company's foreign currency denominated receivables, payables and purchase commitments, and
interest rate fluctuations on its floating rate long-term loans and. Gains or losses from forward exchange contracts
are likely to be offset by gains or losses on foreign currency denominated receivables or payables while those gains
or losses on forward contracts used to hedge firm commitments are included in the measurement of the related
transaction when the hedged transaction occurs. Interest rate risks are also managed as the expected interest
expense on long-term loans is fixed. Thus, market price risks on exchange rate and interest rate fluctuations are
minimal.
c) Liquidity and cash flow requirements: The cash flow requirements on the derivative instruments are limited to the
net differences between the spot rates and contracted forward rates at settlement dates (for forward contracts);
and foreign currency purchase commitments arising from the different foreign currency demand (for cross
currency swap contracts); and amounts receivable/payable arising from the differences in the rates on interest rate
swap contracts. Also, options may not have to be exercised at all in cases where the strike price is higher than the
related market price at exercise dates. Management believes that the foregoing requirements are not material.
164
T S M C A n n u a l R e p o r t 2 0 0 1
6) Fair value of financial instruments
Non-derivative financial instruments
Assets
Cash and cash equivalents
Pledged time deposits
Short-term investments
Receivables from related parties
Accounts receivable
Long-term investments
Refundable deposits
Liabilities
Short-term bank loans
Commercial paper payable
Payable to related parties
Notes and accounts payable
Payable to contractor and equipment suppliers
Long-term bank loans (including current portion)
Bonds (including current portion)
Guarantee deposits
Derivative financial instruments
Forward exchange contracts (sell)
Interest rate swaps
Option
Currency swap
Fair values of financial instruments were determined as follows:
a) Short-term financial instruments - carrying values.
b) Short-term investments - market values.
Carrying
Amount
Fair Value
$40,522,659
$40,522,659
36,183
2,498,071
174,607
20,662,671
12,746,162
787,347
6,849,364
1,270,000
553,305
1,744,553
12,999,508
30,480,445
31,600,000
7,964,078
28,031,667
26,969
(39,500)
2,713
36,183
8,027,321
174,607
20,662,671
15,076,262
787,347
6,849,364
1,270,000
553,305
1,744,553
12,999,508
30,480,445
32,193,224
7,964,078
27,603,345
(343,088)
(252,833)
(2,712)
c) Long-term investments - market value for listed companies and net equity value for the others.
d) Refundable deposits and guarantees deposits - carrying values.
e) Long-term liabilities - based on forecasted cash flows discounted at interest rates of similar long-term liabilities.
Bonds payable are discounted at present value. Fair values of other long-term liabilities are also their carrying
values as they use floating interest rates.
f) Derivative financial instruments - based on outright forward rates and interest rate in each contract.
The fair values of non-financial instruments were not included in the fair values disclosed above. Accordingly, the
sum of the fair values of the financial instruments listed above are not equal the fair value of the Company.
T S M C A n n u a l R e p o r t 2 0 0 1
165
21. SEGMENT FINANCIAL INFORMATION
a. Geographic information:
Overseas
Domestic
Adjustments
and
Elimination
Combined
2001
Sales to unaffiliated customers
$-
$130,207,394
$-
$130,207,394
Transfers between geographic areas
8,152,070
4,791,101
(12,943,171)
-
Total sales
Gross profit
Operating expenses
Non-operating income
Non-operating expenses
Income before income tax
Minority interest loss
Identifiable assets
Long-term investments
Total assets
b. Gross export sales
Area
America
Asia
Europe
$8,152,070
$134,998,495
($12,943,171)
$130,207,394
($1,224,832)
$33,295,718
($1,686,562)
$30,384,324
(22,145,649)
6,582,789
(11,130,279)
$3,691,185
$6,450,970
$73,433,656
$327,894,422
($23,335,461)
$377,992,617
12,746,162
$390,738,779
$65,131,432
23,929,350
7,811,281
$96,872,063
The export sales information is presented by billed regions.
c. Major customer
The customer with the sales amounted over 10% of the Company's total sales is as following:
Customer
A
Amount
$21,789,769
%
17
166
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
FINANCING PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No. Financing
Counter-Party
Name
Financial
Statement
Account
Financing
Limit for
Each
Borrowing
Company
Maximum Balance
for the Period
(US$ in Thousand)
Ending Balance
(US$ in Thousand)
Interest
Rate
Financing Allowance
for Bad Debt
Reasons
Collateral
Item Value
Transaction
Amount
1
2
TSMC-BVI
TSMC
Technology
Other
receivables
-
US$14,662
US$14,662
7.75%
VIS
VIS Holding
Prepaid
expenses
(Note 2)
$1,232
$-
-
$-
-
Operating
capital
Prepayments
for product
development
- $-
- -
$-
-
Note 1: Not exceeding the issued capital of the Company.
Note 2: Not exceeding 10% of the issued capital of VIS for each counterparty, and also limited to 30% of the issued capital of each counterparty.
Note 3: Not exceeding 20% of the issued capital of VIS.
Financing
Company's
Financing
Amount Limits
(US$ in Thousand)
US$779,968
(Note 1)
$4,400,000
(Note 3)
TABLE 2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
ENDORSEMENT/GUARANTEE PROVIDED
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
No. Endorsement/
Guarantee
Provider
Counter-Party
Name
Limits on Each
Counter-party's
Endorsement/
Guarantee Amounts
Maximum
Balance for
the Period
(US$ in Thousand)
Nature of
Relationship
(Note 2)
Ending Balance
(US$ in Thousand)
Value of
Collateral Property,
Plant and
Equipment (Note 3)
Ratio of
Accumulated Amount
of Collateral to Net
Equity of the Latest
Financial Statement
Maximum
Collateral/Guarantee
Amounts Allowable
(Note 1)
0
TSMC
TSMC Development Inc.
TSMC - North America
WAFERTECH, LLC
3
2
3
(Note 4)
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
$9,379,732
(US$268,000)
1,399,960
(US$40,000)
15,399,560
(US$440,000)
$-
-
-
$54,397,659
3.38%
0.51%
5.56%
Note 1: 30% of the issued capital of the Company.
Note 2: The No. 2 represents a subsidiary in which TSMC holds directly over 50% of the equity interest.
The No. 3 represents an investee in which TSMC holds directly and indirectly over 50% of the equity interest.
Note 3:Promissory notes for collateral.
Note 4:Not exceeding 10% of the issued capital of the Company, and also limiting to the issued capital of the transaction entity, unless otherwise approved by Board of directors.
T S M C A n n u a l R e p o r t 2 0 0 1
167
TABLE 3
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
MARKETABLE SECURITIES HELD
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Long-term investment
11,000
$786,062
Subsidiary
Subsidiary
Subsidiary
Investee
Subsidiary
Subsidiary
Investee
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Subsidiary
Long-term investment
-
-
-
-
-
-
Investee
Investee
Investee
Investee
Investee
Investee
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
-
6
556,133
779,968
300
301
-
7,782
16,783
10,500
5,000
15,000
505
-
-
-
-
-
-
-
-
10,147
80,156
3,377,526
19,987,814
3,032,376
2,907,967
741,617
32,129
193,584
105,000
50,000
150,000
280,748
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
100
100
100
25
100
100
32
99
2
11
7
2
10
-
25
25
25
25
25
25
N/A
N/A
$786,062
10,147
80,156
6,584,620
19,987,814
3,032,376
2,907,967
741,617
183,658
274,107
118,726
64,855
139,086
287,610
164,724
158,252
177,812
156,694
157,352
166,639
27,091
125,701
Major shareholder
Short-term investment
3,023
98,282
-
253,173
Held Company Name: TSMC
Stock
TSMC - North America
TSMC - Europe
TSMC - Japan
VIS
TSMC-BVI
TSMC Partners
SSMC
Emerging Alliance Fund
Taiwan Mask Corp.
United Technology Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Hon Tung Ventures Capital
Amkor Technology
Certificate
Po Cherng Investment
Chi Hsin Investment
Kung Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Cherng Huei Investment
Equity
Crimson Asia Capital Fund
Horizon Ventures Fund
Held Company Name: Chi Cherng Investment
Stock
TSMC
(Forward)
168
T S M C A n n u a l R e p o r t 2 0 0 1
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: Chi Cherng Investment
Certificate
Po Cherng Investment
Chi Hsin Investment
Hsin Ruey Investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Kung Cherng Investment
6,000
6,000
6,000
6,000
6,000
$98,834
94,951
94,411
106,687
99,983
Major shareholder
Short-term investment
6,758
226,819
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
99,983
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Po Cherng Investment
15
15
15
15
15
-
15
15
15
15
15
$98,834
94,951
94,411
106,687
99,983
565,937
98,834
94,951
94,017
94,411
99,983
Major shareholder
Short-term investment
4,240
187,508
-
355,058
Pledge 150
thousand shares
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
94,951
94,017
94,411
106,687
99,983
15
15
15
15
15
94,951
94,017
94,411
106,687
99,983
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Cherng Huei Investment
Major shareholder
Short-term investment
4,917
198,896
-
411,724
Pledge 1,600
thousand shares
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
94,411
106,687
15
15
15
15
15
98,834
94,951
94,017
94,411
106,687
Kung Cherng Investment
Major shareholder
Long-term investment
Held Company Name: Chi Hsin Investment
Stock
TSMC
(Forward)
Major shareholder
Short-term investment
3,561
138,747
-
298,220
T S M C A n n u a l R e p o r t 2 0 0 1
169
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Stock
TSMC
Certificate
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Hsin Ruey Investment
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: Chi Hsin Investment
Certificate
Po Cherng Investment
Chi Cherng Investment
Hsin Ruey Investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: Hsin Ruey Investment
6,000
6,000
6,000
6,000
6,000
$98,834
94,017
94,411
106,687
99,983
Stock
TSMC
Certificate
Po Cherng Investment
Chi Hsin Investment
Chi Cherng Investment
Major shareholder
Short-term investment
1,407
98,996
Major shareholder
Long-term investment
Major shareholder
Long-term investment
Major shareholder
Long-term investment
6,000
6,000
6,000
6,000
6,000
98,834
94,951
94,017
106,687
99,983
Kung Cherng Investment
Major shareholder
Long-term investment
Cherng Huei Investment
Major shareholder
Long-term investment
Held Company Name: TSMC-BVI
Stock
InveStar Semiconductor
Development Fund Inc.
InveStar Semiconductor
Development Fund (II) Inc.
TSMC Development Inc.
TSMC Technology Inc.
3DFX Interactive Inc.
Held Company Name: VIS
Bond fund
Qiung Ban
Yuan Da Duo Li #2
THE TP ROC
Stock
Subsidiary of
TSMC-BVI
Subsidiary of
TSMC-BVI
Subsidiary of
TSMC-BVI and its
chairman is also
TSMC's chairman
Subsidiary of
TSMC-BVI and its
chairman is also
TSMC's chairman
-
-
-
-
Long-term investment
45,000
US$65,203
Long-term investment
45,000
US$45,766
Long-term investment
Long-term investment
1
1
US$201,231
100
US$201,231
US$1,591
100
US$1,591
Long-term investment
68
US$297
Short-term investment
Short-term investment
Short-term investment
28,409
26,278
25,923
41,070
202,185
5,617
34,551
400,000
350,000
350,000
902,999
2,651,216
275,766
414,481
VIS Associates Inc.
Subsidiary
Long-term investment
PowerChip Semiconductor Inc.
Etron Technology Inc.
Walsin Technology Inc.
Investee
Investee
Investee
Long-term investment
Long-term investment
Long-term investment
(Forward)
170
T S M C A n n u a l R e p o r t 2 0 0 1
15
15
15
15
15
-
15
15
15
15
15
97
97
$98,834
94,017
94,411
106,687
99,983
117,836
98,834
94,951
94,017
106,687
99,983
US$65,203
US$45,766
-
-
-
-
100
9
3
10
US$30
401,960
352,465
355,763
902,999
3,263,269
281,864
358,994
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: VIS
MEGIC Corporation
Form Factor, Inc.
United Technology Co., Ltd.
Held Company Name: VIS Associates Inc.
Stock
VIS Investment Holding, Inc.
Equity
Silicon Valley Equity Fund
Silicon Valley Equity Fund II
ABN AMRO Bank Equity Certificate
Fund
Grand Palace Trust
Investee
Investee
Investee
Long-term investment
Long-term investment
Long-term investment
16,500
267
3,357
$177,000
64,360
38,716
9
1
2
$188,581
64,360
54,872
Subsidiary of
VIS Associates Inc.
Long-term investment
68
US$891
100
US$891
-
-
-
-
Long-term investment
Long-term investment
-
-
US$7,894
US$5,705
Short-term investment
23,168
US$10,047
35
14
-
US$7,894
US$5,705
US$11,319
Long-term investment
-
US$2,800
100
US$2,800
Held Company Name: VIS Investment Holding, Inc.
Stock
VIS Micro, Inc.
Held Company Name: TSMC Development
Stock
WAFERTECH, LLC
Held Company Name: TSMC Partners
ADR
TSMC
Investee
Long-term investment
200
US$258
100
US$258
Long-term investment
-
US$226,541
99
US$226,541
Investee of TSMC
Development and its
chairman is also
chairman of TSMC
Parent Company
Short-term investment
495
US$7,357
Held Company Name: InveStar Semiconductor Development Fund Inc.
Stock
Silicon Image, Inc.
Marvell Technology Group Ltd.
Silicon Labo Ratories
Chang Yi Technology
Divio
Capella Microsystems, Inc.
Equator Technologies, Inc.
Empower Tel Networks, Inc.
Ubicom, Inc.
Global Test Corp.
Chip Strate
Ritch Tech
APE Fu Ding Technology
(Forward)
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term investment
Short-term investment
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
297
3,413
15
1,668
30
542
133
317
861
Long-term investment
13,268
Long-term investment
Long-term investment
Long-term investment
6,660
1,023
2,750
US$520
US$3,350
US$472
US$1,643
US$3
US$135
US$90
US$344
US$172
US$5,672
US$2,142
US$326
US$1,518
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$8,726
US$1,236
US$123,797
US$519
US$672
US$3
US$135
US$90
US$344
US$172
US$10,126
US$2,073
US$1,743
US$1,336
T S M C A n n u a l R e p o r t 2 0 0 1
171
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: InveStar Semiconductor Development Fund Inc.
Preferred stock
Integrated Memory Logic, Inc.
Divio (Next wave)
SiRF Technology Inc.
Rise
Capella Microsystems, Inc.
Sensory, Inc.
Equator Technologies, Inc.
Light Speed Semiconductor Corporation
Empower Tel Networks, Inc.
Ubicom, Inc.
RapidStream
Tropian, Inc.
Sonics, Inc.
Pico Turbo, Inc.
Atheros, Inc.
NanoAmp Solutions, Inc.
Formfactor, Inc.
Monolithic Power Systems, Inc.
Memsic, Inc.
Reflectivity, Inc.
Signia
Match Lab, Inc.
HINT Corporation
Creosys, Inc.
Incentia Design Systems, Inc.
Bond
Rise
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
1,831
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
667
306
600
1,383
1,404
443
2,252
3,840
1,056
2,056
1,758
3,082
1,050
1,607
541
267
2,521
2,727
1,064
3,000
1,875
1,000
1,500
286
US$1,809
US$500
US$1,333
US$1,500
US$1,298
US$1,250
US$1,338
US$3,064
US$5,128
US$1,361
US$1,050
US$2,334
US$3,082
US$1,250
US$3,593
US$853
US$2,000
US$2,000
US$1,500
US$2,000
US$1,500
US$1,500
US$1,000
US$1,500
US$500
Long-term investment
-
US$300
Held Company Name: InveStar Semiconductor Development Fund (II) Inc.
Stock
HPL Aquisition Corporation
Richtek Technology Corporation
Chang Yi Technology
Preferred stock
Procoat Technology
Omega Band, Inc.
Memsic, Inc.
OEpic, Inc.
Equator Technologies, Inc.
NanoAmp Solutions, Inc.
RapidStream, Inc.
Signia Technologies, Inc.
(Forward)
172
T S M C A n n u a l R e p o r t 2 0 0 1
-
-
-
-
-
-
-
-
-
-
-
Short-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
187
480
487
2,500
1,389
2,289
2,696
770
250
246
500
US$1,124
US$1,001
US$139
US$869
US$1,250
US$1,560
US$2,500
US$1,501
US$1,000
US$1,057
US$750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
US$3,055
US$2,233
US$1,858
US$1,500
US$1,660
US$857
US$864
US$764
US$14,296
US$2,433
US$7,286
US$2,388
US$3,082
US$1,300
US$9,025
US$1,900
US$3,600
US$4,938
US$2,894
US$2,000
US$3,900
US$1,500
US$1,000
US$1,500
US$500
US$300
US$2,669
US$987
US$139
US$857
US$1,250
US$2,489
US$3,023
US$1,501
US$1,000
US$1,057
US$750
Marketable Securities
Type and Name
Relationship
with the Company
Financial Statement
Account
December 31, 2001
Note
Shares
(Thousand)
Carrying Value
(US$ in Thousand)
Percentage of
Ownership
Market Value or
Net Asset Value
(US$ in Thousand)
Held Company Name: InveStar Semiconductor Development Fund (II) Inc.
Advanced Analogic Technology, Inc.
Y-MEDIA Corporation
Monlithic Power Systems, Inc.
Ralink Technology, Inc.
Sonics, Inc.
Newport Opticom, Inc.
Silicon Data, Inc.
Capella Microsystems, Inc.
Angstron Systems, Inc.
Tropain, Inc.
SIRF Technology, Inc.
Match Lab, Inc.
OEpic, Inc.
Bond
Omega Band, Inc.
Pico Turbo, Inc.
Held Company Name: Emerging Alliance Fund
Stock
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
948
281
674
1,833
3,082
1,157
500
800
1,567
1,464
20
313
-
N/A
N/A
US$1,261
US$1,500
US$1,515
US$1,500
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
Global Investment Holding Inc.
Investee
Long-term investment
10,000
$100,000
Preferred stock
Quake Technologies, Inc.
Pixim, Inc.
Newport Opticom, Inc.
NetLogic Microsystems, Inc.
Quickilver Technology, Inc.
Ikanos Communication, Inc.
Litchfield Communications
-
-
-
-
-
-
-
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
Long-term investment
467
833
962
602
3,320
1,741
3,799
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
1
3
6
1
29
3
6
US$1,261
US$1,500
US$1,515
US$1,767
US$3,082
US$1,204
US$250
US$1,000
US$750
US$2,000
US$131
US$250
US$-
US$192
US$295
$100,000
US$1,000
US$2,500
US$1,000
US$1,850
US$3,500
US$1,500
US$1,000
T S M C A n n u a l R e p o r t 2 0 0 1
173
Marketable
Securities
Type and
Name
Financial
Statement
Account
Company Name: TSMC
Stock
Emerging
Alliance Fund
Long-term
investment
Systems on
Silicon
Manufacturing
Company
(SSMC)
Taiwan
Semiconductor
Technology
Long-term
investment
Amkor
Technology
Amkor
Technology
Long-term
investment
Amkor
Technology
Company Name: Emerging Alliance Fund
Stock
Global
Investment
holding, Inc.
Long-term
investment
Global
Ivestment
holding,Inc.
Convertible Commercial Paper
VM Labs, Inc.
Long-term
investment
VM
Labs, Inc.
TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-
IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Counter-
Party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance
Shares
(Thousand)
Amount
Shares
(Thousand)
Amount
(US$ in
Thousand)
Shares
(Thousand)
Amount
Carrying Gain (Loss)
on Disposal
Value
Shares
(Thousand)
Amount (US$ in
Thousand)
(Note 1)
Subsidiary
-
$-
-
$837,045
Emerging
Alliance
Fund
Long-term
investment
SSMC
Investee
90
935,870
211
3,553,862
-
-
$-
-
$-
-
$-
-
-
$741,617
301
2,907,967
-
-
-
-
50,000
500,000
-
-
50,000
395,748
(Note2)
500,000
(104,252)
-
-
-
-
-
-
-
-
505
280,748
10,000
100,000
-
-
-
-
-
-
-
-
505
280,748
10,000
100,000
-
US$4,000
- US$1,000
US$4,000
(US$3,000)
-
-
Company Name: VIS
Stock
VIS
Associates Inc.
Long-term
investment
Subsidiary
-
23,750
464,077
17,500
597,783
-
-
-
-
41,070
902,999
Bond Fund
Qiung Ban
THE TP ROC
Yuan Da
Duo Li #2
NITC
FUBON JU-I
(Forward)
Short-term
investment
Short-term
investment
Short-term
investment
Short-term
investment
Short-term
investment
-
-
-
-
-
-
-
-
-
-
174
T S M C A n n u a l R e p o r t 2 0 0 1
-
-
-
-
-
-
-
-
-
-
35,548
500,000
7,139
100,263
100,000
263
28,409
400,000
40,874
550,000
14,951
201,482
200,000
1,482
25,923
350,000
49,017
650,000
22,739
302,698
300,000
2,698
26,278
350,000
2,048
300,000
2,048
302,386
300,000
2,386
31,397
450,000
31,397
452,789
450,000
2,789
-
-
-
-
Marketable
Securities
Type and
Name
Financial
Statement
Account
Counter-
Party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance
Shares
(Thousand)
Amount
Shares
(Thousand)
Amount
(US$ in
Thousand)
Shares
(Thousand)
Amount
Carrying Gain (Loss)
on Disposal
Value
Shares
(Thousand)
Amount (US$ in
Thousand)
(Note 1)
Capital Save
Income
Home Run
Short-term
investment
Short-term
investment
-
-
Company Name: VIS Associates Inc.
ABN AMRO
Bank Equity
Certificates
Short-term
investment
-
-
-
-
-
-
-
-
-
-
15,295
200,000
15,295
201,139
200,000
1,139
51,811
650,000
51,811
656,159
650,000
6,159
-
-
-
-
223,168
US$10,047
-
-
-
-
23,168
US$10,047
Company Name: InveStar Semiconductor Development Fund. Inc.
Stocks
Centillium
Tec. Corp
Marvell
Technology
Group Ltd.
Short-term
investment
Short-term
investment
Preferred Stocks
Lara
Networks, Inc.
Short-term
investment
-
-
-
-
-
-
Company Name: InveStar Semiconductor Development Fund (II) Inc.
165
US$660
4,665
US$4,579
1,544
US$772
-
-
-
-
-
-
165 US$7,474
US$660
US$6,814
-
-
1,252 US$38,094
US$1,229
US$36,865
3,413
US$3,350
1,544 US$8,170
US$772
US$7,398
-
-
Sonic, Inc.
Long-term
investment
-
-
-
-
3,082
US$3,082
-
-
-
-
3,082
US$3,082
Note 1: The ending balance included the equity in net income (net loss) recognized by the equity method and the accumulated translation adjustment.
Note 2: Disposal price included $115,000 in cash and the 505 thousand shares of Amkor Technology.
The market value for the shares of Amkor Technology on the disposal day worth $280,748.
TABLE 5
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
ACQUISITION OF INDIVIDUAL REAL ESTATES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Company Name
Property
Transaction
Date
Transaction
Amount
Payment Term
Counter-Party
Nature of
Relationship
Prior Transaction of Related Counter-party
Price Reference
Owner
Relationship
Transfer Date Amount
Purpose of
Acquisition
Other Terms
TSMC
Fab 12
and office
Jan. 10, 2001
$345,000
Depend on the
progress of the
construction
China
Construction
Co, Ltd.
Jan. 29, 2001
476,200
Fu Tsu .
Depend on the
progress of the Construction
construction
Co, Ltd
-
-
N/A
N/A
N/A
N/A
Public bidding Manufacturing
None
purpose
N/A
N/A
N/A
N/A
Public bidding Manufacturing
None
purpose
T S M C A n n u a l R e p o r t 2 0 0 1
175
TABLE 6
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING
TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
For the Year Ended December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Related Party
Nature of Relationship
Transaction Details
Abnormal Transaction Note/Accounts Payable or Receivable
Note
Purchase/Sale
Amount % to Total*
Payment Terms
Unit Price
Payment Terms
Ending Balance
% to Total
Company Name: TSMC
Phillips and its
affiliates
VIS
ITRI
WAFERTECH, LLC
Major shareholder
Sales
$2,389,257
Investee
Sales
1,177,094
The chairman of TSMC
is a director of ITRI
Indirect investee of a
subsidiary (TSMC-BVI)
Sales
114,546
Purchase
6,797,817
VIS
Investee
Purchase
3,801,975
2
1
-
37
22
Net 30 days
from invoice date
Net 45 days from
monthly closing date
Net 45 days from
monthly closing date
Net 30 days from
monthly closing date
Net 45 days from
monthly closing date
None
None
$116,499
None
None
320,179
None
None
37,383
None
None
(817,616)
None
None
(548,472)
22
61
7
39
26
*Percentage for sales is of gross sales and percentage for purchase is of the total purchases of material and finished goods.
TABLE 7
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
AND VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Related Party
Nature of Relationship
Ending Balance
Turnover Rate
Overdue
Amounts Received
Allowance for
Amount
Action Taken
in Subsequent Period
Bad Debts
Company Name: TSMC
VIS
Investee
$320,179
N/A
$52,668
Accelerate demand on account receivables
Phillips and its affiliates
Major shareholder
116,499
58 days
20,820
Accelerate demand on account receivables
$92,345
80,559
-
-
176
T S M C A n n u a l R e p o r t 2 0 0 1
TABLE 8
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
AND VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES
ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
December 31, 2001
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Investee Company
Location
Main Businesses
and Products
Original Investment Amount
Balance as of December 31, 2001
Dec. 31, 2001
Dec. 31, 2000
Shares
(Thousand)
Percentage of Carrying Value
Ownership
Net Income (Loss)
of the Investee
Investment
Gain (Loss)
Note
Investor Company: TSMC
TSMC - North America
San Jose,
California, U.S.A
Marketing and
engineering support
$333,718
$333,718
11,000
TSMC - Europe
Amsterdam,
The Netherlands
Marketing and
engineering support
2,960
2,960
TSMC - Japan
Yokohama, Japan
VIS
Hsin-Chu, Taiwan
Marketing and
engineering support
IC design and
manufacturing
83,760
35,142
100
100
100
$786,062
$4,560
$4,560
Subsidiary
10,147
420
420
Subsidiary
80,156
(183)
(183)
Subsidiary
-
6
6,503,640
6,503,640
556,133
25
3,377,526
(8,692,423)
(2,236,940)
Investee
TSMC - BVI
Tortola,
British Virgin Islands
Investment
24,165,780
24,159,958
779,968
100
19,987,814
(4,855,844)
(4,855,844)
Subsidiary
Po Cherng Investment
Taipei, Taiwan
Investment
Chi Hsin Investment
Taipei, Taiwan
Investment
Kung Cherng Investment
Taipei, Taiwan
Investment
Chi Cherng Investment
Taipei, Taiwan
Investment
Hsin Ruey Investment
Taipei, Taiwan
Investment
Cherng Huei Investment
Taipei, Taiwan
Investment
TSMC Partners
Tortola,
British Virgin Islands
Investment
100,000
100,000
100,000
100,000
100,000
100,000
10,350
100,000
100,000
100,000
100,000
100,000
100,000
10,350
SSMC
Singapore
Wafer
manufacturing
4,986,344
1,432,482
Emerging Alliance Fund
Cayman Islands
Investment
837,045
-
-
-
-
-
-
-
300
301
-
25
25
25
25
25
25
164,724
158,252
177,812
156,694
157,352
166,639
110,960
27,740
Investee
77,008
76,241
103,603
117,006
113,755
19,252
Investee
19,060
Investee
25,901
Investee
29,251
Investee
28,439
Investee
100
3,032,377
2,357,405
2,357,405
Subsidiary
32
99
2,907,967
(5,381,499)
(1,722,080)
Investee
741,617
(127,249)
(126,612)
Subsidiary
T S M C A n n u a l R e p o r t 2 0 0 1
177
2. Internal Control System Execution Status
2-1 Statement of Internal Control
Taiwan Semiconductor Manufacturing Company Limited
Statement of Internal Control (Translation)
TSMC has conducted a self-assessment of internal controls for the period of January 1, 2001 to December 31, 2001
based on TSMC's internal control system. The results are as follows:
Date: February 8, 2002
1. TSMC acknowledges that the Board of Directors and management personnel are responsible for establishing,
performing, and maintaining an internal control system, which has already been established. The purpose of the
internal control system is to provide a reasonable assurance for achieving the company's goals, i.e. (i) efficient and
effective operations (including profit, efficiency and the safeguard of assets, etc.), (ii) reliability of financial reports,
and (iii) compliance with applicable laws and regulations.
2. The internal control system has an inherent constraint. No matter how impeccable the system is. It can only
provide a reasonable assurance of achieving the three goals abovementioned. Due to the changes in the
environment and changing circumstances, the effectiveness of the internal control system may vary accordingly.
However, TSMC's internal control system has self-monitoring functions with which once a shortcoming is found,
action will be taken to cure.
3. TSMC evaluates the effectiveness in the design and performance of its internal control system in accordance with
the items for evaluating the effectiveness of internal control system as indicated in the Points Governing the
Establishment of Internal Control Systems by Public Companies (the "Points") announced by the Securities and
Futures Commission of the Ministry of Finance. Based on management control process, the items for assessing the
internal control system specified in the Points divide internal control into five components: 1. Control
Environment; 2. Risk Assessments; 3. Control Activities; 4. Information and Communication; 5. Monitoring. Each
component comprises certain factors. For the said factors please refer to the Points.
4. TSMC has evaluated the effectiveness in the design and performance of its internal control system in accordance
with the aforesaid factors.
5. Based upon the results of evaluation abovementioned, TSMC is of the opinion that the design and performance of
its internal control, including the efficiency and effectiveness of operations, reliability of financial reports, and
compliance with applicable laws and regulations, during the period of January 1, 2001 to December 31, 2001 is
effective and provide a reasonable assurance of achieving the abovementioned goals.
6. This Statement of Internal Control will be a prominent feature of TSMC's annual report and prospectus, and will be
released to the public. Should any statement herein involve forgery, concealment or any other illegality, Articles 20,
32, 171 and 174 of the Security Transaction Law shall apply.
7. This Statement of Internal Control has been approved by TSMC's Board of Directors at the meeting of February 8,
2002 with 7 directors present at the meeting and 0 director disagreeing with this Statement of Internal Control.
Morris Chang
Rick Tsai
Chairman of the Board & CEO
President & COO
Taiwan Semiconductor Manufacturing Company Limited
178
T S M C A n n u a l R e p o r t 2 0 0 1
2-2 Under specified circumstances, Securities & Futures Commission may request the Company to engage CPA to
examine the Company's internal control system and disclose the CPA's audit report: Not Applicable
3. Major contents of record or written statements made by any director or supervisor which specified
his/her dissent to important resolutions passed by the Board of Directors during 2001 or the period
from January 1, 2002 to February 28, 2002: None
4. Private Placement Securities: Not Applicable
5. Balance of TSMC Common Shares/ ADR acquired, disposed of and held by subsidiaries
Name of
Paid-in
Fund
Percentage
Transaction
Acquisition
Disposal
Subsidiary
Capital
Source
of Ownership
Date
No. of Shares Amount No. of Shares Amount
As of 02/28/2002
Unit: NT$K; Share; %
Investment Balance as of 02/28/2002
Income No. of Shares
(Loss)
Amount
Balance of
Balance of Balance of
Pledged
Guarantee
Financing
Shares
Provided by
Provided by
TSMC
TSMC
Kung Cherng 400,000
Retained
25%
Year 2001
1,930,934
Investment
Co., Ltd.
earnings
Year 2002
-
Chi Cherng
400,000
Retained
25%
Year 2001
863,808
Investment
Co., Ltd.
earnings
Year 2002
-
Chi Hsin
400,000
Retained
25%
Year 2001
1,017,504
Investment
Co., Ltd.
earnings
Year 2002
-
Po Cherng
400,000
Retained
25%
Year 2001
1,525,715
Investment
Co., Ltd.
earnings
Year 2002
-
Cherng Huei 400,000
Retained
25%
Year 2001
1,719,056
Investment
Co., Ltd.
earnings
Year 2002
-
Hsin Ruey
400,000
Retained
25%
Year 2001
402,048
Investment
Co., Ltd.
earnings
Year 2002
-
TSMC
US$300
Retained
100%
Year 2001
197,886
Partners, Ltd.
earnings
Year 2002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,758,269
226,819
6,758,269
226,819
3,023,328
98,282
3,023,328
98,282
3,561,264
138,747
3,561,264
138,747
1,100,000
94,084
45,442
4,240,004
187,508
300,000
26,706
13,440
3,940,004
174,242
1,100,000
94,084
49,589
4,916,696
198,896
300,000
26,706
14,571
4,616,696
186,761
-
-
-
-
-
-
-
-
-
-
-
-
1,407,168
98,996
1,407,168
98,996
692,601 US$7,357
692,601 US$7,357
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6. Other Necessary Supplement
Any Events in 2001 which had significant impact on shareholders' rights or the prices for the securities as
stated in Item 2 Paragraph 2 of Article 36 of Securities and Exchange Law of R.O.C.: None
T S M C A n n u a l R e p o r t 2 0 0 1
179
180
T S M C A n n u a l R e p o r t 2 0 0 1
US GAAP
FINANCIAL INFORMATION
Please be advised that our 2001 full annual report that includes complete US GAAP reconciled financial statements
and footnotes will be available when we file Form 20-F with the SEC. Our Form 20-F, or our 2001 full annual report,
can be found at the SEC and on TSMC's website no later than June 30, 2002.
T S M C A n n u a l R e p o r t 2 0 0 1
181
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Short-term investments
Receivable from related parties
Notes receivable
Accounts receivable
Allowance for doubtful receivables
Allowance for sales returns and others
Inventories - net
Deferred income tax assets
Prepaid expenses and other current assets
Total Current Assets
2001
Amount
2000
Amount
$37,556,295
$38,840,217
1,398,071
494,732
176,582
19,957,636
(1,100,492)
(2,581,551)
9,828,328
2,350,147
2,721,421
1,502,098
948,726
125,175
30,335,314
(946,734)
(2,458,323)
12,785,723
8,178,016
3,034,624
70,801,169
92,344,836
LONG-TERM INVESTMENTS
11,599,150
10,663,804
PROPERTY, PLANT AND EQUIPMENT
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Total cost
Accumulated depreciation
Advance payments and construction in progress
Net Property, Plant and Equipment
877,371
829,239
60,523,505
53,874,708
280,023,690
241,995,862
6,062,496
4,865,610
347,487,062
301,565,419
(155,948,960)
(103,884,879)
59,749,530
47,067,352
251,287,632
244,747,892
CONSOLIDATED DEBITS
11,437,572
11,530,973
OTHER ASSETS
Deferred income tax assets
Deferred charges - net
Refundable deposits
Assets leased to others
Miscellaneous
Total Other Assets
16,245,828
3,769,750
784,089
555,053
37,452
6,629,805
3,335,665
979,067
625,647
28,290
21,392,172
11,598,474
TOTAL ASSETS UNDER R.O.C. GAAP
$366,517,695
$370,885,979
(Forward)
182
T S M C A n n u a l R e p o r t 2 0 0 1
U.S. GAAP Adjustments :
- Restatement of marketable securities to market - trading
- Technology transfer in payment of capital stock
- Goodwill
- Effect of U.S. GAAP adjustments on deferred income tax
- Effects of the adjustments on equity investments
- Unrealized gain on long-term investments
- TSMC
- Investee
- Impairment loss
- Depreciation
- Treasury stock
TOTAL ASSETS UNDER U.S. GAAP
2001
2000
3,936,191
(103,500)
3,304,949
(157,500)
36,026,327
46,817,264
(2,639)
(1,476,433)
168,926
499,302
(2,513)
(842,477)
40,183
(14,063)
(10,916,070)
(10,916,070)
1,455,476
(2,115,695)
27,471,885
-
(1,285,762)
36,944,011
$393,989,580
$407,829,990
T S M C A n n u a l R e p o r t 2 0 0 1
183
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
LIABILITIES
CURRENT LIABILITIES
Short-term bank loans
Payable to related parties
Accounts payable
Payable to contractors and equipment suppliers
Income tax payable
Current portion of bonds
Accrued expenses and other current liabilities
Total Current Liabilities
LONG-TERM LIABILITIES
Long-term bank loans
Bonds - net of current portion
Total Long-term Liabilities
OTHER LIABILITIES
Guarantee deposits
Accrued pension cost
Deferred gain on sale-leaseback
Miscellaneous
Total Other Liabilities
2001
Amount
2000
Amount
$6,269,181
$3,833,841
1,048,273
1,397,879
2,606,339
8,507,827
12,867,236
25,550,273
81,483
5,000,000
6,665,000
33,329,052
3,298
-
6,923,414
47,424,992
22,399,360
24,000,000
46,399,360
23,339,367
29,000,000
52,339,367
7,212,688
1,856,617
268,165
141,498
9,478,968
7,086,379
1,511,277
434,183
14,356
9,046,195
MINORITY INTEREST IN SUBSIDIARIES
120,240
321,726
TOTAL LIABILITIES UNDER R.O.C. GAAP
$89,327,620
$109,132,280
U.S. GAAP Adjustments
- Bonuses to employees, directors and supervisors
- Derivative financial instruments
- Pension expenses
1,201,437
962,215
48,360
2,212,012
5,258,730
443,838
49,079
5,751,647
TOTAL LIABILITIES UNDER U.S. GAAP
$91,539,632
$114,883,927
Mandatorily redeemable preferred stock
$13,000,000
$13,000,000
184
T S M C A n n u a l R e p o r t 2 0 0 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(In Thousand New Taiwan Dollars, Except Par Value)
SHAREHOLDERS' EQUITY
Capital stock - $10 par value
2001
Amount
2000
Amount
Authorized: 17,800,000 thousand shares in 2000 and 24,600,000 thousand
shares in 2001
Issued: Preferred - 1,300,000 thousand shares
$13,000,000
$13,000,000
Common -11,689,365 thousand shares in 2000 and 16,832,554
thousand shares in 2001
Capital surplus
Retained earnings:
Appropriated as legal reserve
Appropriated as special reserve
Unappropriated earnings
Cumulative translation adjustments
Unrealized loss on long-term investments
168,325,531
116,893,646
57,128,433
55,285,821
17,180,067
349,941
19,977,402
1,228,701
-
10,689,323
1,091,003
65,143,847
(278,377)
(71,564)
TOTAL SHAREHOLDERS' EQUITY UNDER R.O.C. GAAP
$277,190,075
$261,753,699
U.S. GAAP Adjustments
- Bonuses to employees, directors and supervisors
- Pension expenses
- Restatement of marketable securities to market
- Trading
- Available-for-sale
- Technology transfer in payment of capital stock
- Effects of the adjustments on equity investments
- Unrealized gain on long-term investment from an investee
- Impairment loss
- Depreciation
- Treasury stock
- Goodwill
- Derivative financial instruments
- Mandatorily redeemable preferred stock
- Effect of U.S. GAAP adjustments on deferred income tax
TOTAL SHAREHOLDERS' EQUITY UNDER U.S. GAAP
(1,201,437)
(5,258,730)
(48,360)
(49,079)
3,936,191
168,926
(103,500)
(1,476,433)
499,302
3,304,949
40,183
(157,500)
(842,477)
(14,063)
(10,916,070)
(10,916,070)
1,455,476
(2,115,695)
36,026,327
(962,215)
-
(1,285,762)
46,817,264
(443,838)
(13,000,000)
(13,000,000)
(2,639)
(2,513)
12,259,873
18,192,364
$289,449,948
$279,946,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY UNDER U.S. GAAP
$393,989,580
$407,829,990
T S M C A n n u a l R e p o r t 2 0 0 1
185
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2001 and 2000
(In Thousand New Taiwan Dollars)
GROSS SALES
2001
Amount
2000
Amount
$128,560,708
$169,192,312
SALES RETURNS AND ALLOWANCES
(2,675,816)
(2,994,708)
NET SALES
COST OF SALES
GROSS PROFIT
OPERATING EXPENSES
Research and development
General and administrative
Marketing
Total Operating Expenses
125,884,892
166,197,604
92,228,098
87,609,670
33,656,794
78,587,934
10,649,019
7,939,839
2,290,139
7,203,591
7,408,121
2,681,534
20,878,997
17,293,246
INCOME FROM OPERATIONS
12,777,797
61,294,688
NON-OPERATING INCOME
Gain on sales of short-term investments- net
Interest
Royalty income
Insurance compensation - net
Premium income - net
Gain on sales of long-term investments - net
Technical service income
Gain on sales of property, plant and equipment
Foreign exchange gain - net
Other
Total Non-Operating Income
NON-OPERATING EXPENSES
Equity in net losses of investee companies - net
Interest
Foreign exchange loss - net
Loss on sales of and provision for loss on property, plant and equipment
Amortization of issuance costs of bonds
Other
Total Non-Operating Expenses
186
T S M C A n n u a l R e p o r t 2 0 0 1
1,619,062
1,486,656
1,301,606
860,835
234,732
105,439
55,077
52,376
-
759,793
6,475,576
3,959,020
3,144,042
695,620
235,629
12,504
420,053
8,466,868
1,060,919
1,679,736
524,194
1,623,832
8,115
15,144
138,514
62,921
828,025
178,403
6,119,803
187,179
2,717,035
-
114,768
32,658
461,327
3,512,967
INCOME BEFORE INCOME TAX
2001
2000
10,786,505
63,901,524
INCOME TAX BENEFIT
3,740,678
1,167,884
INCOME BEFORE MINORITY INTEREST
14,527,183
65,069,408
MINORITY INTEREST IN LOSS (INCOME) OF SUBSIDIARIES
(44,009)
36,786
NET INCOME UNDER R.O.C. GAAP
$14,483,174
$65,106,194
U.S. GAAP Adjustments
- Pension expenses
- Restatement of marketable securities to fair value - trading
- Bonus to employees
- Accrual
- Adjustment to fair market value
- Income (loss) from equity investments
- Impairment loss
- Depreciation
- Gain on sales of treasury stock
- Derivative financial instruments
- Amortization of goodwill
- Technology transfer in payment of capital stock
- Amortization of compensation expense
- U.S. GAAP income tax adjustment
NET INCOME UNDER U.S. GAAP
719
587,401
21,366
2,092,506
(1,201,437)
(5,258,730)
(25,208,512)
(23,290,096)
(633,955)
135,849
-
(10,916,070)
1,455,476
(95,031)
(518,377)
-
(230,054)
(434,145)
(10,790,937)
(5,395,468)
54,000
(107,500)
(126)
(36,458,279)
($21,975,105)
54,000
(143,333)
(1,677)
(43,365,852)
$21,740,342
T S M C A n n u a l R e p o r t 2 0 0 1
187